Forex indicators assure technical analysis which is a good market scanning while transacting. There are many features which need to be known and observed while using technical analysis based on technical analysis on platform. Commodity channel (cc) is one of the fundamentals indicator which is used in technical analysis. Now, we will mention what the indicator is and how is it used ?
CCI Indicator (Commodity Channel Index):
The indicator ,which was improved by Donald Lambert, is frequently used in forex and stock market. In the beginning, it is applied by considering share certificate and technical analysis methods. But, forex investors use it for analysis of foreign Exchange and commodity market. And they get succesful results. Average of closure, optimum and minimum prices of retrospective days are taken while calculating CCI. Price how far away from moving average is showed by using the average as base. Lambert determines that prices repeat with 22 days period, rising for 11 days, decline for 11 days, and remarks that 11 days application is suitable. Usage of CCI indicator out of range from 5-25 is not recommended. The indicator has moving and fragile sensing system, and it can catch beginning of trend. Thanks to that, it can give a lot of signals. It is suitable for very short term and horizontal market. It can give wrong ideas for middle term, long term, and volatile markets.
Construal of CCI Indicators:
Number of value ranges of indicator is +100 and -100. Movement of prices between these two values is accepted. If it exceeds these values, it gives buying and selling signals. Approaching these points means that trend is over and it can change direction. Line 0 is accepted as centre. For example, average line exceeds value of +100 and it indicates that prices reach at overbought area, and purchase is not made in the areas so selling might begin. Line, which is under -100, indicates that prices are at oversold areas. And it is construed that selling shouldn’t be made in these areas, and prices will increase again.
Period was determined as 14 days in the system. Traders can change the time as manuelly according to their investment tactics and transaction strategies.
3 different techniques are used while CCI indicator is construed.
Construal according to price movements between -100,+100 range. It shows areas of overbought and oversold.
Construal of discordance between price graph and CCI indicator. If CCI and price graph are act incompatibly, it means that trend changes direction. It is expected an adjusting.
Construal of production of purchase and sale signal according to moving average ,which is added on indicator, intersect CCI.
5-day simple moving average of 14-day CCI is taken and added to indicator.
If 14-day CCI exceeds 5-day line , it’s purchase. If total opposite happens, that is selling signal.
- Date: 06 December 2016 Tue 02:58
- Last Added
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