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.