Category: Indicator > Miscellaneous
The Commodity Channel Index is used primarily to identify beginning and ending of cycles in futures markets and is commonly used to identify buy and sell opportunities. The CCI is calculated so that 70-80% of all price activity falls between +100 and -100 on its vertical scale.
Many analysts believe a long position is indicated when the CCI exceeds +100 while a short position is indicated when the CCI falls below -100 but these values should be based more on your market analysis. For example, you may decide that for the market you are evaluating, a -125 indicates taking a short position while a +150 indicates taking a long position.
Many analysts also use this indicator to signal overbought and oversold markets, much like an oscillator. Breakouts above the CCIlong line indicate an overbought market and breakouts below the CCIshort line indicate an oversold market. The CCI often misses the early part of a new move because of the amount of time it spends in the neutral position (between the CCIlong and CCIshort lines). Many analysts believe the CCI crossing above or below zero identifies market conditions before the CCIlong and CCIshort lines are crossed.
Length - Number of bars used to calculate the CCI
CCIlong - Value used to determine a bullish/overbought market
CCIshort - Value used to determine a bearish/oversold market
INPUTS: LENGTH(20), CCILONG(100), CCISHORT(-100);
IF PLOT1 > PLOT2 THEN
ALERT("CCI IS IN OVERBOUGHT TERRITORY")
IF PLOT1 < PLOT3 THEN
ALERT("CCI IS IN OVERSOLD TERRITORY");
IF PLOT1 CROSSES OVER 0 THEN
ALERT("CCI HAS CROSSED OVER ZERO")
IF PLOT1 CROSSES UNDER 0 THEN
ALERT("CCI HAS CROSSED UNDER ZERO");