Indicator CCI (Commodity Channel Index) is a software product for market analysis that belongs to family of oscillators. Instrument shows price deviation from moving average to monitor the market overbought/oversold.
The famous trader Donald Lambert back in 80s of last century brought formula CCI to trade on commodity platforms. But index showed successful results both in stock and in financial market. Today, oscillator is available in standard indicator sets for almost all popular brokers.
Description and parameters of CCI Indicator in IQ Option broker
Trading with oscillator CCI on IQ Option platform begins with a click on the label of indicator menu in trade room and the selection of instrument from the list.
The parameters window of CCI indicator.
For user are available two digital variables and ability to set convenient graphical settings for each element of instrument. Since the moving average is applied in calculating index, the main variable is period. Trader can prescribe any convenient period value depending on the chosen trading strategy. To determine the extreme zones of price deviation in oscillator’s settings, limits of overselling and overbought are provided. The default is 100.
Commodity channel index like most oscillators operates in a separate area that is located at the bottom of trade room.
Before relying on indicator signals, it is better for inexperienced users to leave the default settings and test the instrument for a while on a training account. This approach will reduce the risk of losing trader’s deposit and help him gain useful experience and knowledge.
How to trade with CCI?
First of all, trader required to determine the current main trend in order to exclude obviously unprofitable deals the older timeframes (from 4 hours and above). Then trader has to follow the indicator’s behaviour to trend changes. Oscillator CCI forms several variants of signals to enter in trade:
- When oscillator chart return from critical overbought/oversold zones. Market participants should prepare for conclusion of deals if instrument’s signal line entered overbought or oversold area. Traders start buying or selling as soon as oscillator crossed critical line again. Trade without auto-stops is not recommended, since indicator does not form single-valued signals to close deal.
However, users often apply intersection of opposite limit line as a signal for fixing profits.
- Crossing the zero mark of CCI scale. Traders who apply this type of signals enter the trade at intersection of zero line of oscillator in direction of travel, i.e: if graph passes through the zero mark from top to bottom to user should sell. And when the signal line crosses zero from the bottom up to market participant should buy.
- Divergence of price chart from index. This signal tells trader about imminent significant change in current trend or price correction. User should close the current deal and refrain from new purchases/sales until the correction is completed after divergence was determined.
Summary
Indicator CCI is a simple but effective trading tool. It works well both separately and in conjunction with other market analysis instruments. In this material described only main provisions about oscillator CCI. Users can build and adjust their own profitable trading strategies and approaches on basis of this information.
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future
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