Description
The Commodity Channel Index (CCI) expresses variation of a security's price based on its statistical mean. Using the CCI can help you identify excess buying or selling pressure when it crosses above the +100 level or below -100, respectively. However, the usage of CCI is not restricted to it: one can benefit from interpreting the CCI as a traditional oscillator in relation to certain overbought and oversold levels.
By default, the CCI uses the 14 period timeframe in order to calculate the statistical mean, although short-term investors might want to reduce this number while long-term investors may extend it in order to create larger signals.
Being a multi-faceted indicator, the CCI can be used in three common trading methods. The first suggests looking for divergence between the price action and the CCI. The second method uses the -100 to +100 scale: as it was previously stated, readings falling out of this range tend to indicate the excessive buying or selling pressure. Finally, the third method involves analyzing CCI values in respect to zero line: when price action shows no sign of trending conditions, the CCI tends to fluctuate around the zero level, conversely, strong trends are believed to accelerate the CCI (see the example picture below).
Input Parameters
| Parameter | Description |
|---|---|
length
|
The number of bars used to calculate the CCI. |
over sold
|
Fixes the horizontal oversold line at a given level. |
over bought
|
Fixes the horizontal overbought line at the given level. |
show breakout signals
|
Controls visibility of breakout signals given by CCI. |
Plots
| Plot | Description |
|---|---|
CCI
|
The Commodity Channel Index. |
OverBought
|
The overbought level. |
ZeroLine
|
Zero level. |
OverSold
|
The oversold level. |
UpSignal
|
Signal given when CCI crosses above the zero level. |
DownSignal
|
Signal given when CCI crosses below the zero level. |
Example*
*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.