CCI Indicator Strategy A Full Guide To Squeeze The CCI

stock cci indicator

This is a signal to get out of longs or to start watching for shorting opportunities. Traders can position inside the range or set an order to short if/when price breaks out the bottom of the range. In doing so, in this example, you participate fully in the momentum push down.

In these cases, we can proceed just exactly as we would with the stochastic indicator. In the previous image, we have displayed the CCI indicator at the bottom of the chart and, over the QQQ, the Nasdaq ETF. Finally, we will learn about some strategies we can use with this tool, and we will detail some examples to make the best from it and use it in our desing of a trading system.

How is CCI Indicator Calculated?

The Commodity Channel Index, also known as the CCI indicator, is an oscillator tool that was developed by Donald Lambert in 1980. The creation of CCI was related to the need to understand unique patterns and trends in the trading market. The CCI has become widely spread amongst investors since it is a technical analysis method that helps investors to foresee potentially oversold and overbought levels.

  • As a leading indicator, the Commodity Channel indicator can provide us with excellent great trade signals.
  • Similarly, if the CCI indicator is in a value that is lower than -100, we will consider it an overbought zone.
  • Let us add one more indicator – a simple moving average with period 100– to the CCI system in order to improve signals quality and, accordingly, trading efficiency.
  • The divergence of the price shown by the CCI indicator and the one shown on the chart is Divergence.

In conclusion, let us take a look at a more complex CCI strategy which, nevertheless, is suitable both for beginners and professional Forex traders. All indicators in the system (CCI, MACD and Parabolic SAR) are set with the default settings. As a leading indicator, one can look for the overbought or oversold zone which may indicate trend reversals.

CCI indicator settings

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. A CCI surge above +100 on the weekly chart indicates that an uptrend is emerging and a bullish trading bias is adopted.

The .015 figure is known as the “constant.” If you’re running your own CCI indicator calculation, you can certainly change it. If you got value from the CCI trading strategy PDF, please don’t be shy to share it with others. It feels good to do the right thing, so go ahead and do the right thing and you’ll have your heart filled with joy. This brings us to the next important thing that we need to establish for the CCI trading strategy, which is where to place our protective stop loss.

CCI Trading Strategies

The 5-period simple moving average of the typical price will, of course, be $24.00. The CCI can be adjusted to the timeframe of the market traded on by changing the averaging period. The CCI indicator is calculated by following a specific sequence of steps. The core element of the calculations is to first determine the difference between the current price of an asset and the average value of prices within a specific period. Then this result is compared with the average difference over the same period. The last step includes the multiplication of the generated final result and a constant, the majority of values will range between the values of +100 and -100.

  • That’s where the CCI indicator strategy comes in and the price action as well.
  • Moreover, it is also used to monitor the trend of an asset and alert traders about upcoming selling or buying opportunities so they will enter or exit a trade at the right time.
  • The CCI can be adjusted to the timeframe of the market traded on by changing the averaging period.
  • A bullish divergence occurs when the underlying security makes a lower low and CCI forms a higher low, which shows less downside momentum.

Before getting too excited about divergences as great reversal indicators, note that divergences can be misleading in a strong trend. A strong uptrend can show numerous bearish divergences before a top actually materializes. Conversely, bullish divergences often appear in extended downtrends.

Stock Gainers & Losers

A shorter CCI will be more volatile with a smaller percentage of values between +100 and −100. Conversely, the more periods used to calculate the CCI, the higher the percentage of values between +100 and −100. The five scalp trades with Twitter generated a profit of about 2% of the invested capital. At the same time, the longest trade took 1 hour and the shortest one took 20 minutes. This is why this trading strategy falls in the category of scalping. 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.

Crown Castle International Corp Shares Approach 52-Week Low … – Nasdaq

Crown Castle International Corp Shares Approach 52-Week Low ….

Posted: Fri, 23 Jun 2023 00:00:00 GMT [source]

The more profitable exit strategy is to take profits when the CCI touches the +200 level. However, since the market will only occasionally give us such big trading opportunities we need to have a backup plan. Now, day trading is all about getting in and out of the market fairly quickly. In other words, we need the price to make lower lows while the CCI indicator has to do higher lows. In an uptrend, we would look for higher highs in prices and lower highs reading on the CCI indicator.

Swing Trading Strategies

On the chart that is demonstrated above the price of the asset is moving up where both the price and the PSAR are above the 20 EMA line. While the asset’s price moves to lower levels a bullish reversal in the PSAR line is monitored at the same time. Additionally, the CCI remains over the +100 value, indicating an existing strong trend. It should be mentioned that the bullish trend will remain as long as the asset’s price stays over the latest swing low. When the PSAR and the CCI are combined, they form an efficient tool for day trading.


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