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Trades with price strength by CCI indicator

March 27, 2015 9:42 am

Commodity Channel Index and in shorten term CCI indicator is a strength technical indicators to get difference between mean price of any currency pair and average of select time frame, developed by Mr. Donald Lambert for accurate measurement of prices using true mean price formula. In simple wording we are now to use it to determine the perfect price oversold and overbought condition means the maximum high level of price different from the routine movement and the same as maximum low level of price.

commodity-channel-index-indicator

commodity-channel-index-indicator

Technical levels of commodity channel index indicator

CCI indicator is based on oscillator family indicators and normally values fluctuate between 100 to -100 and typically these values provide us strong trading signals.

Rules for Buy and Sell Trades

When graph line simple is called signal touch or break boundary limits of 100 and -100 then open position as a strong overbought condition at 100 level recommend sell trades and a strong oversold condition at -100 level recommend buy position.

CCI Formula

  1. Choose a predetermined period “X” (Standard setting = “14”);
  2. Calculate “True Price” = TP = (High + Low + Close)/3;
  3. Calculate an SMA for TP over “X” periods;
  4. Calculate the standard deviation of the SMA from each TP;
  5. Then CCI = (TP – SMA)/(0.015 X Standard Deviation value)

Commodity Channel Index Indicator is available in Metatrader 4 Software.

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