Subject: Technical Analysis - Commodity Channel Index

Last-Revised: 1 Apr 1997
Contributed-By: (anonymous), contact Chris Lott (contact me)

The Commodity Channel Index (CCI) is a timing tool that works best with seasonal or cyclical contracts. It keeps trades neutral in a sideways moving market, and helps get in the market when a breakout occurs. A moving average of the CCI can also be displayed. A constant number is entered in the parameter screen to adjust the sensitivity of the index. This will change the visual amplitude of the index lines.

FORMULAS:       AVE = SUM OF LAST N PRICES / D
     MEAN DEVIATION = SUM OF LAST (PRICE - AVE) / D
                CCI = C * (PRICE - AVE) / MEAN DEVIATION
             CCIAVE = OLD.CCIAVE + (SF * (CCI - OLD.CCIAVE))
      SF: Smoothing Factor =  2 / (N + 1) where N = periods in ave,
       or Smoothing Factor =  0 < SF < 1

PARAMETERS:  1st: Number of bars in the AVE average (ie. 5A).
                  Use the H,L,M,A  study modifiers.
             2nd: Multiplier constant C (usually 50-150).
             3rd: Optional number of bars in the CCI average (ie. 3).
                  Example: 8,150,3

SCALE:       Grid lines at the +100, 0 and -100 levels.

COLOR:       1st: CCI    2nd: Exponential average of CCI

HOW TO USE:  Buy when CCI crosses ABOVE the +100 scale line.
             Sell when CCI crosses BELOW the -100 scale line.

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