Metatrader Indicator Commodity Channel Index (CCI)
Commodity channel index technical indicator is involved in the measurement of deviation of the commodity price as compared to its average statistical price. When the index goes up in values the price becomes unusually high as compared to the average price and low values indicate vice versa. Inspite of the nomenclature the commodity channel index can be applied for any financial instrument and need not be restricted only for the wares.
There are a couple of basic techniques for usage of commodity channel indexes:
- Divergence indicators come into play, when the price goes to a new height of maximum and commodity channel index cannot start growing above the previous maximums. Price correction automatically follows the classical divergence.
- This channel index ranges from
100. Values above + 100 inform the indications of the state of being over bought or about a probability of correcting decay, and the values below 100 inform the state of being over sold or a probability of correcting increase in levels.
Calculation
- For finding the typical price you have to have an addition of high, low and the close prices of each bar and divide the result by 3.
- For calculation for the n-period (N) you should arrive at simple moving average (SMA) of typical prices. It is denoted as SMA (TP, N) = SUM (TP, N)/N
- The received SMA (TP, N) should be reduced from typical prices.
- To calculate the n-period SMA with the help of absolute standard deviation (D) values.
- Multiplication of the received SMA (D, N) divided by 0.015.
- Division of Multiple received after multiplication simple moving average by Standard Deviation.
To conclude, commodity channel index is helpful for correcting the price situations and the stock market levels. These indices help in taking proper decisions on analytical lines for which stocks to be bought and which are not to be touched at a particular point of time by graphic indications. These are important for acting as a guide to investors and as an indication of stock market conditions to the investor community at large.
This entry was posted on Thursday, July 31st, 2008 at 8:17 am and is filed under metatrader indicator. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
