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Category Name: Trading Technicals
 
» Sub-Category Name: Charting
 
 
Commodity Channel Index
By: vss2000.com

Commodity Channel Index ( CCI )


The CCI or Commodity Channel Index is a means by which the variation of a security's price is calculated from its statistical mean.

Much like the Average Directional Movement Index, the CCI can help give a valuable measurement of the overall trendiness of a market. The faster the CCI is accelerating, the more strongly the market is trending. While it is perhaps mathematically possible for the CCI to move upward while the market does not, this is unlikely.

Typically oscillating between 100 and -100, a CCI reading above 100 implies an overbought condition (and a pending price correction) while readings below -100 imply an oversold condition (and a pending rally).

Keep in mind that the CCI can provide important information to a trader even when it is not giving entry signals. If a market stays inside the /-100 range most of the time, it's demonstrating the absence of a trend, so it might be best to avoid that market or use a countertrend trading strategy.

Despite its name, the CCI can be used effectively on any type of security, not just commodities.

 

 

 

 
 

 

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