This indicator was developed by Donald Lambert, who had originally planned to use this indicator only in the markets to determine the turning points. Soon began to use the indicator on the stock markets and forex. The basic principle of operation and efficiency indicator commodity channel index was in the theory, according to which all assets move in a certain period, and the minima and maxima appear for a relative time interval.
Indicator CCI is a technical indicator is a type of oscillator and measure the speed of price movement.
Description of indicator CCI:
The indicator has a scale fluctuations -100 dl 100, the central value is the mark of 0 (common marker 0, but there is no difference). Fluctuations in the indicator depends on the period, a trader may choose.
How could affect periods on indicator? If the period is less important, the oscillation of the indicator will be more volatile and more than a mark of 100 and 100. If you specify a longer period, the indicator will be variations between marks 100 and 100.
The creator of the indicator recommends that a period which is equal to 1/3 full cycle. Full cycle is the time interval from a minimum to a new low or high to a new high. For example, if a full cycle lasts 30 days, it is recommended to set the value of the indicator in the period of 10 days. Determine the full cycle to itself, without using the indicator "commodity channel index."
The indicator has a wide range of signals to buy and sell financial instruments. The same traders use this indicator to determine the turning points and extrema chart and trend strength. As with most indicators, signals sent by CCI, must be confirmed by other indicators.
Use indicator CCI:
Introduction. Originally created indicator gave advice on the use of commodity index range, only when the indicator value exceeds the mark of 100 and 100. When the indicator crosses the boundaries of the levels 100 and 100 (the mark of 100 and 100 we wake up call control levels), the generated signals to buy and sell. In most cases this is true, because 80% of the time variations are between levels, and only 20% of the time they exceed them.
The intersection of the reference levels. When the indicator line crosses the 100 mark from the bottom up, it means a strong upward trend , so this is a buy signal. A warrant is close to the intersection of the 100 level down. Opposite signal to sell, is a level crossing -100 down. Close position to after crossing the line of the indicator mark -100 upwards.
Determine the turning points. If the market is dominated by the upward trend and indicator also directed in an upward direction and exceed the 100 mark, then when the indicator will show a reversal, it is a signal that the trend is losing strength and will soon be the opposite movement. So it is with a downward trend.
Divergence . On the divergence of you probably have heard and read a lot of articles already on the previous indicator, so we do not wake up to her to stop.
The bottom line:
This indicator is very useful, as you can understand from the description. Therefore, its use is mandatory if you want to be a successful trader.