What is Commodity Channel Index? Best Currency Trading Indicators

What is Commodity Channel Index?

      Commodity Channel Index is one of Technical Indicators which used to measures the deviation of the currency price from its typical arithmetical price. Low values of the index point out that the price is abnormally too low, and high values show that the price is high being compared with the average value. CCI can be used for any financial markets, and not only for the products like commodity or shares.

CCI techniques:

Two techniques are used to fine the trend.

• Find out Divergence: The divergence shows when the price reaches a new high, and CCI cannot grow above the previous high.
• Overbuying/Overselling: CCI range is ±100. If value is above +100 then it is overbuying state and below 100 overselling state.

Calculation:

Typical Price Calculation,

           Typical Price (TP) = (HIGH + LOW +CLOSE)/3

Calculate SMA of Typical price,

           SMA(TP, N) = SUM[TP, N]/N

Subtract the TP to received SMA,

            D = TP — SMA(TP, N)

Calculate the n-period SMA of complete D values,

            SMA(D, N) = SUM[D, N]/N

Multiply SMA(D, N) by 0015,

            M = SMA(D, N) * 0015

Divide M by D

            CCI =M/D