CHUỖI GIAO NƯỚC TẬN NƠIIf you would have taken the first signal the first time the CCI indicator reached the -200 level, you would have lost money. Hopefully, you can see now why we wait for two consecutive oversold readings to buy. You have to keep in mind that technical indicators are just mathematical equations. However, the CCI is a leading indicator which means it doesn’t lag behind the price. It is important to remember that the level of CCI depends on the number of periods that are used between -100 and +100 values. Thus, if the indicator has a high percentage between the limit of -100 and +100, this shows that many periods are used.
You can trade with the indicator using multiple ways; locating trend direction, finding overbought and oversold levels, and identifying divergences. In this type of strategy, traders need to constantly monitor the levels of the price so that they could spot the overbought or oversold periods. During an overbought zone, the possibility of a price decline is very high.
It isn’t the superstar that will single-handedly make you an undisputed trading wizard but will contribute significantly to your well-oiled trading machine. It is essential to test how your strategy reacts to the indicator’s changes with paper money before applying it within your real account. If you set the period to less than 14, the line will get more reactive. Alternatively, it will be more sensitive to price information and fluctuate way more between the boundaries without breaking the lines for too long on either side of the spectrum. The idea of using the MA is to have it serve as a support/resistance line. On the chart, the indicator is plotted as a line within a box, fluctuating between -100 and +100.
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This reversal was a precursor to a 5.33% decline in AAPL’s stock price. As it pertains to bearish divergences, the trader would first look for instance, where the asset’s price is making higher highs. A bearish divergence is confirmed when the CCI turns downwards and crosses below the zero line or a specific threshold, often +100. Zero line crossovers can also be used to determine emerging trends. When the CCI crosses above the zero line, it is often considered a bullish signal, and when it crosses below zero, it is considered bearish.
- The CCI indicator made a higher low, but the price did not accompany the movement of the indicator, marking us a bullish divergence that is yet to be completely developed.
- Unlike other indicators such as the Zigzag, the Commodity Channel Index indicator will not repaint.
- In this regard, the bigger the look-back period is, the higher percentage of the CCI values would fall between -100 and +100.
- While Lambert originally used CCI to trade commodities, the indicator is used across different assets nowadays.
- It is important to remember that the level of CCI depends on the number of periods that are used between -100 and +100 values.
The CCI range for an index ETF, such as SPY, will usually be smaller than for most stocks, such as Google. You can study the overbought and oversold levels of different commodities to take a position on the spot (cash) price, futures or options. Also, using two timeframes or multiple timeframes can help filter out false signals, thereby reducing the risk of entering an unprofitable trade.
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Therefore, traders look at past readings on the indicator to get a sense of where the price reversed. Another commodity, meanwhile, may tend to reverse near +325 and -350. Zoom out on the chart to see lots of price reversal points, and the CCI readings at those times. In this way, the indicator best forex trading platform can be used to provide trade signals when it acts in a certain way. The CCI (Commodity channel index) indicator measures the current price level to an average price over a given period. Make sure to avoid trading on the first moment when the CCI moves above +100 or dips below -100.
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It is strongly advised before starting trading with the CCI indicator to spot the zones where the market is oversold or overbought. Thus, traders can be prepared to open a buy or a sell position when the price is low or high respectively. Below forex trading secrets are the most popular CCI strategies that are used by investors. In the chart above the Fibonacci Retracement is combined with the CCI indicator in the crypto market. This example presents the 2-hour intraday chart of Bitcoin/ TetherUS.
Cara Menggunakan Indikator CCI Untuk Melihat Divergensi Market
However, you will need to be patient to be able to place orders with this trading strategy. The overarching principles of the CCI strategy can be applied to your own trading strategy as well. All markets move in cycles, so we recommend using the CCI indicator in combination with higher time frames as this will yield better trading performance according to our backtesting results. Below is demonstrated the Apple’s share chart which presents that while the price makes a new lower low, the CCI indicator makes a higher low.
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Such scenarios are considered a signal of a potential extended move and filter for the current bullish/bearish market direction. When the CCI ranges over the +100 mark, it is considered favorable for the bulls, while when moving below the -100 mark, it is viewed as a bear signal. Thanks to its efficiency, the CCI indicator became a favorite tool also of equity and Forex traders over time.
The MACD is another type of momentum indicator popular in the trading world due to its high accuracy and effectiveness. It is a more complex tool that uses the Moving Average (MA) to find the momentum and trend direction of an asset. The CCI indicator, in contrast, presents the oversold and overbought areas earlier than the MACD. Moreover, it is used to present the deviation from the average price. This scan reveals stocks that are in an uptrend with oversold CCI turning up.
How CCI indicator works
Conversely, if the indicator shows values below the -100 it is thought to be the beginning of a strong downtrend, and sell signals are generated. Much higher or lower prices, such as -200 or +200, can be applied depending on the volatility of the asset. This scan reveals stocks that are in a downtrend with overbought CCI turning down.
You can also use it to get exposure to shares, forex and other markets with us. Notice here how the line moves outside the key levels only a few times and how it tends to remain at or beyond those levels for much longer. The trading and investing signals are provided for education purposes and if you use them with real money, you do so at your own risk. Based on the simulations we decided to backtest the CCI indicator by using a 9-day lookback period and a buy threshold of -90.
CCI’s calculation produces positive and negative values that oscillate above and below a Zero Line. Typically a value of 100 is identified as overbought and a reading of -100 is identified as being oversold. The CCI is a versatile technical indicator that could be applied across various timeframes. The choice of timeframe is largely dependent on the trader’s strategy and objectives. It is essential that traders properly backtest their strategies on different timeframes to find the one that aligns best with their trading goals.
The commodity channel index was created by Donald R. Lambert in 1980 to spot reversals in commodities, but the indicator is now widely used in other securities including stocks and ETFs. Moreover, combining CCI signals with price action patterns like candlestick formations can offer more reliable entry and exit signals. A break of the trendline often precedes a break of the trendline Day trading forex on the price chart, providing an early signal of a trend change. The indicator is also lagging, which means at times it will provide poor signals. A rally to 100 or -100 to signal a new trend may come too late, as the price has had its run and is starting to correct already. Both of these technical indicators are oscillators, but they are calculated quite differently.
The commodity channel index forecasts when a market cyclical reversal is likely. One of the fundamental theories of the CCI is that market moves in cycles, with peaks and troughs coming at time intervals. It is extremely important, as with many trading tools, to use the CCI with other indicators. Pivot points work well with the CCI because both methods attempt to find turning points. Therefore, as with most momentum based oscillators, divergence between price and the indicator’s reading should not be ignored. Divergences between CCI and price action can be a signal that changes in trend may be forthcoming.