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CCI Chart Set up
look for divergences above and below
the 100 lines and use the 0 line to look for retraces instead of getting
higher lows with price going down which is a divergence
Formula:
Where: n = number of periods
TPt = the
current typical price:
MAt = current simple moving average
MD = mean deviation
Pn = price
Donald R. Lambert, who originated the
CCI, suggests using a number of periods less than one-third of the cycle
length. Using this calculation, seventy to eighty percent of random price
fluctuations should fall within the +100% to -100% range. If the CCI yields
a value above +100%, a long position may be indicated. When the CCI value
falls below +100%, closing a long position should be considered
The
Commodity Channel Index is an indicator designed for use in markets that
follow definite cyclical patterns. While the CCI does not determine cycle
lengths, if you have an idea of cycle length, the CCI can be a valuable
timing tool. As you can see we use a CCI set at 14 this is the length you
should use when you start out with a plus 100 line and minus 100 line
which can be set in most charting systems.
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