Commodity Channel Index

Description:

The Commodity Channel Index (CCI) is a versatile indicator that can be used to identify new trends or warn of extreme conditions. Developed by Donald Lambert, it measures the variation of a security's price from its statistical mean. High values show that prices are unusually high compared to average prices whereas low values indicate that prices are unusually low.

Input Parameters:

• Length: Number of periods used in the calculation,

Use Cases:

• Trend Identification: CCI above +100 can signal the start of an uptrend, while below -100 may indicate a downtrend.
• Overbought/Oversold Conditions: Values above +100 suggest overbought conditions, and values below -100 indicate oversold conditions, potentially heralding a price direction reversal.
• Divergences: If the CCI diverges from the price, it suggests the current trend may soon change. For example, if the price hits a new high but the CCI does not, it may indicate the trend is weakening.
• The Horizontal Channel offers a structured framework for understanding and capitalizing on market periods of consolidation, providing clear strategies for trading within the channel and identifying potential breakouts or breakdowns as signals for trend reversals.

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