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Investor/RT Tour ( more on Technical Indicators )
CCI (Commodity Channel Index)

The Formula . . . 

. . .more on Formulas 

 
TP = (HI + LO + CL) / 3

    TP stands for Typical Price

MATP = MA(TP, n)
    n = CCI Period
    MATP stands for Moving Average (Simple) of Typical Price


    where n = CCI Period
    MDTP stands for Mean Deviation of Typical Price
 

CCI = (TP - MATP) / (MDTP * 0.015)

Modified CCI
When "Modified CCI" is checked, the Typical Price is calculated differently, as seen below.  Otherwise, the calculations are identical.

TP = (Max(HI,n) + Min(LO,n) + CL) / 3
    n = CCI Period
    TP stands for Typical Price

 
The Presentation . . . 

. . . more on Charts 

CCI Chart

Above is a Daily Candlestick Chart of the Microsoft Corporation (MSFT).  The blue line in the lower window pane represents the CCI using the preferences seen in the window below.

 
The Preferences . . . 

. . . more on Preferences 

CCI Preferences

  • CCI Period - Period used in the CCI calculations above.

  • Reference Line (1, 2) - Levels at which to draw horizontal reference lines.

  • Modified CCI - Dictates the method used for calculating "Typical Price".  (See "Formula" section above.)

  • Smoothed CCI - Check this if you would like the CCI line smoothed.

  • Smoothing Period - Smoothing period used only if "Smoothed CCI" is checked

  • Smoothing Type - Smoothing type used only if "Smoothed CCI" is checked

  • Draw As - Options for drawing the CCI as a continuous or connected line, or a hollow, solid, or custom historogram.

  • Line Color - Color and style of the CCI line in the chart.

 
The Description . . .
The Commodity Channel Index (CCI) is a price momentum indicator developed by Donald R. Lambert in 1980. It is designed to detect beginning and ending market trends.  CCI represents the position of current price relative to the average of price over a recent period.  Lambert discussed CCI in detail in a 1980 article in Stocks and Commodities V.1:5(120-122).

The CCI usually falls in a channel of -100 to 100. The conventional CCI trading system works as follows.  When it rises above 100, buy and hold until CCI falls back below 100. When CCI falls below -100, sell short and cover the short when it rises above the -100 line. Some trading systems cover on a rise above minus 85.  The following scans represent this strategy.

Buy Signal
CCI > 100 AND CCI.1 <= 100

Sell Signal
CCI < -100 AND CCI.1 >= -100

A more aggressive use of the CCI indicator dictates entering positions when the index crosses the 0 line.  This method helps incorporate the early part of a new move.  When the CCI crosses above the 0 line from negative territory, this is a bullish signal.  When the CCI crosses below the 0 line from positive territory, this is a bearish signal.  The following scans represent this strategy.

Buy Signal
CCI > 0 AND CCI.1 <= 0

Sell Signal
CCI < 0 AND CCI.1 >= 0

Some traders actually use this indicator in the exact opposite way. They interpret levels above 100 as overbought regions and bearish signals, and levels below -100 as oversold regions and bullish signals.
 

Keyboard Adjustment . . .
The periods involved in the CCI indicator can be adjusted directly from they keyboard without opening up the preference window.  First, select the indicator, then use the up and down arrow keys to adjust the CCI Period up or down by 1.  To adjust the Smoothing Period (assuming "Smoothed CCI" is turned on), hold down the shift-key while hitting the up and down arrows.  For more information on technical indicator adjustment, click here.
 
RTL Token . . . CCI ( more )
The RTL Token for the Commodity Channel Index is CCI.  A common system for trading the CCI is to buy when the CCI crosses above 100:

CCI > 100 AND CCI.1 <= 100

And to liquidate this position when the CCI crosses back below the 100 line:

CCI < 100 AND CCI.1 >= 100

Other strategies involving CCI can be found in the description above.
 

User Strategies . . . 
 
      03/26/02
  If you have a strategy involving this indicator that you'd like to share, please email support@linnsoft.com 
   Mike Walker   02/28/02
    
Yes CCI is one of the scans I use: CCI >100 or < -100 flashes warning marker (!) on my charts.

I have also set up a custom column to add CCI values for 1,2,5 and 10 min time frames. When the value is >+350 or <-350 the trend is very violent and likely to continue. (these values occur momentarily and only last 2-3 mins so it sounds a warning and flashes XX all along the screen bottom)  But if CCI is >100<-100 in only 1 or 2 min time frame then a retracement is likely.. unless the market is trending in which case sideways is more likely.