Subject: Technical Analysis - Commodity Channel Index
Last-Revised: 1 Apr 1997
Contributed-By: (anonymous), contact Chris Lott (contact me)
The Commodity Channel Index (CCI) is a timing tool that works best with seasonal or cyclical contracts. It keeps trades neutral in a sideways moving market, and helps get in the market when a breakout occurs. A moving average of the CCI can also be displayed. A constant number is entered in the parameter screen to adjust the sensitivity of the index. This will change the visual amplitude of the index lines.
FORMULAS: AVE = SUM OF LAST N PRICES / D MEAN DEVIATION = SUM OF LAST (PRICE - AVE) / D CCI = C * (PRICE - AVE) / MEAN DEVIATION CCIAVE = OLD.CCIAVE + (SF * (CCI - OLD.CCIAVE)) SF: Smoothing Factor = 2 / (N + 1) where N = periods in ave, or Smoothing Factor = 0 < SF < 1 PARAMETERS: 1st: Number of bars in the AVE average (ie. 5A). Use the H,L,M,A study modifiers. 2nd: Multiplier constant C (usually 50-150). 3rd: Optional number of bars in the CCI average (ie. 3). Example: 8,150,3 SCALE: Grid lines at the +100, 0 and -100 levels. COLOR: 1st: CCI 2nd: Exponential average of CCI HOW TO USE: Buy when CCI crosses ABOVE the +100 scale line. Sell when CCI crosses BELOW the -100 scale line.
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