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Comodity Channel Index (CCI)

Created by Donald Lambert. This indicator is used to see if a new trend is building or signal extreme conditions. Showing oversold and overbought levels. Originally developed specifically for commodities cycles, but applicable to forex as you can see from the example.

Example

Interpretation

If the CCI is high and positive, then this indicates a bullish signal. And prices are far above their average.

If the Comodity Channel Index shows low and negative line, then this indicates a bearish signal. And prices are far below their average.

If the indicator moves from -100 above 100, this indicates the start of an uptrend.

If the indicator moves from 100 below -100, this indicates the start of a down trend.

The extreme areas are between 200 and 300 and between -200 and -300.

Calculation

CCI = (Typical Price - 20-period SMA of TP) / (.015 x Mean Deviation)
Typical Price (TP) = (High + Low + Close)/3
Constant = .015

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