What is the commodity channel index?
The commodity channel index (CCI) is a technical tool. It is an indicator of the Price oscillator. Donald Lambert has developed the commodity channel index, which was listed in the Commodies , now futures , in 1980. It works equally well on stocks and other markets. Another opinion is that the markets must move the index to more than 200 or below -200 to go far enough to be ready to turn. Those who have signed up for this point of view tend to consider the bull trend, began when the commodity channel index for the first time passes over 100, while they think the first step below -100 marks the beginning of the bear trend. Yet another thought school is when CCI exceeds above zero and the prices are above the medium long gliding average, and shorten when CCI exceeds below zero with prices below the sliding average.
The commodity channel index is determined by deducting the average price from the typical price and by dividing the average price deviation from the average price multiplied by 0.015. The typical price is defined as the average of the sum, low and close prices of the commodity for the only trading day. The diameter of the typical price is the amount of a series of units of commodity price, divided by the same number of units. The price deviation is equal to the sum of the difference between the typical price and the average price over several periods and then divided by the same number of periods. Finally, the 0.015 is any factor that the creator used in an effort to have about 80% of the value of the value to lie between -100 and 100.
Bollinger Bands in some respects are quite similar to commodity channel index. This analysis tool uses a standard deviation from a sliding diameter rather than the average deviations used by the CCI. When it is plotted into the price chart, the difference is small. CCI is exceeded over 100 almost simultaneously with prices over the upper Bollinger Band. Similarly, prices are exceeded under the lower Bollinger Band whenCCI passes below -100.