CCI Indicator Secrets

CCI or Commodity channel index indicator is a technical indicator which developed by Donald Lambert and introduced in 1980. Commodity channel index indicator is good technical tools which used to identify a new trend and extreme movement in the market movement. CCI Commodity channel index indicator can be apply also in other market like a stocks, or ETFs.

Donald Lambert introduced the CCI indicator first time in 1980. The basic calculation of CCI is difference between pivot point and simple moving average indicator in the certain period of time and then divide by absolute deviation. In readings CCI value is use 2 lines which use to identify overbought and oversold levels.


CCI Commodity channel index interpretation

Forex traders usually use CCI indicator to help identify the direction of the market trend, extreme movements and trend strength. Just like other technical indicator CCI can not use alone you should add other technical indicator.

Usually CCI move above and below zero level, with the normal movement between +100 and -100. When the indicator moves above +100 then we can assume the market is in overbought condition and when the indicator moves below -100 then we can assume the market is in oversold condition. And just like other overbought and oversold character, the market price has potential to move reverse.

CCI Lambert focus on the movement above +100 and below -100 to make buy and sell trading signals. Lambert said that the market 70-80% moves between +100 and -100, and if the market moves above +100 or below -100 that would be buy and sell trading signals.

When the CCI technical indicator move above +100, we can assume the market has strong bullish trend and we can open buy trading position and when the CCI technical indicator move below -100, we can assume the market has strong bearish trend and we can open sell trading position.

There are so many experienced traders use CCI indicator to define reversal movement. You can use CCI indicator for other purpose like a
1. You can use CCI indicator to define overbought and oversold levels
2. you can use CCI indicator to determine divergence signals
3. You also can use CCI indicator as breakout indicator