![]() ![]() ![]() You could enter at close or break of highs Check the 14 to ensure it is above the zero line.Long trades: Price must cross and close above the 34 EMA and the 50 must cross the zero line.This is a 15 minute chart of crude oil futures which is a preferred day trading market here at Netpicks. CCI 14 – paying attention the the +100 and -100 levels.CCI 50 – paying attention to the zero level.The first CCI trading strategy is trading a trend direction change using: From there, we can determine if a market has momentum and is worthy to trade.ĥ0 CCI + 34 EMA Trading Strategy – Trend Direction Change In essence, we are looking at the CCI as a means to gauge to see where price is in relation to a moving average. CCI measures, via the levels, the strength of the momentum in the market.Price pulling from an average price is showing momentum.Price that is hugging a moving average is not showing momentum.The further price moves away, the faster price moves away, this is how momentum is measured. What you may want to consider is the CCI is measuring how fast/far price moves away from an average price. Notice how far and fast price pulls away from the SMA and the CCI reading The green arrow are extreme price moves.Look at price crossing or hovering near the zero line The green arrows show where the CCI is crossing the zero line.A few things you should notice to understand how the CCI works: I have plotted a 20 period simple moving average on price and the CCI 20 in the lower pane. To explain what that means may and give you a possible “AHA” moment, let’s look at a chart. The indicator can be considered a detrended moving average oscillator. 015, is designed to ensure that the majority of the time, the levels of +100 and -100 contain price. Price Source: While many indicators use the closing price, the CCI will use the average price of 3 prices: as part of the calculationįrom there, the calculation of the CCI (is using a 14 period setting) will be:ĬCI = (Typical Price – 14 Period SMA of Typical price) / (.015 x Mean Deviation).Levels: These are the +100, -200, 0, levels that can be changed depending on the back testing results of the trader.Look-back Period: Usually 14 and 20, this is the number of periods prior to current that the indicator will use in the calculation.Like many trading indicators, the CCI has certain variables that can be changed depending on the trading strategy: While oversold and overbought levels were not the intention of the CCI, many traders in Forex use those market states as the basis for a trading strategy. He would then look to establish a trading position in that direction. A move below 100 would be used as an oversold condition.įrom there, traders expect a retrace in price and often look for reversal trades.ĭonald Lambert, the designed of the indicator, actually used extreme readings such as +100 or -100 as signs of a strong/weak market. The +100 would be considered overbought as an example. These levels are often used as overbought and oversold levels. The CCI oscillates between several levels including: The CCI indicator, the commodity channel index, is a momentum based indicator that falls under the oscillator classification. ![]()
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