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Commodity Channel Index CCI

Technical Indicator


Commodity Channel Index (CCI) is a technical indicator used in the analysis of financial markets. It is designed to identify cyclical trends in asset prices, particularly in commodities, and is based on the premise that the price of an asset will fluctuate around a long-term average.

The CCI is calculated by taking the difference between the current asset price and its moving average (MA), and dividing that difference by a measure of the asset's recent volatility. The resulting value is then divided by a constant multiple of the mean absolute deviation (MAD) of the asset price from its MA.

The formula for calculating the CCI is as follows:

CCI = (Typical Price - N-period SMA of TP) / (0.015 x Mean Deviation)

Where:
Typical Price = (High + Low + Close)/3
N = the number of periods used in the calculation of the SMA
SMA = Simple Moving Average
Mean Deviation = the sum of the absolute differences between each typical price and the N-period SMA divided by N

The resulting CCI value is typically plotted over time, with levels above +100 indicating an overbought asset and levels below -100 indicating an oversold asset. Traders often use the CCI to identify potential buy or sell signals based on these extreme levels, as well as divergences between CCI and asset prices.




   
     

Commodity Channel Index CCI

Technical Indicator


Commodity Channel Index (CCI) is a technical indicator used in the analysis of financial markets. It is designed to identify cyclical trends in asset prices, particularly in commodities, and is based on the premise that the price of an asset will fluctuate around a long-term average.

The CCI is calculated by taking the difference between the current asset price and its moving average (MA), and dividing that difference by a measure of the asset's recent volatility. The resulting value is then divided by a constant multiple of the mean absolute deviation (MAD) of the asset price from its MA.

The formula for calculating the CCI is as follows:

CCI = (Typical Price - N-period SMA of TP) / (0.015 x Mean Deviation)

Where:
Typical Price = (High + Low + Close)/3
N = the number of periods used in the calculation of the SMA
SMA = Simple Moving Average
Mean Deviation = the sum of the absolute differences between each typical price and the N-period SMA divided by N

The resulting CCI value is typically plotted over time, with levels above +100 indicating an overbought asset and levels below -100 indicating an oversold asset. Traders often use the CCI to identify potential buy or sell signals based on these extreme levels, as well as divergences between CCI and asset prices.




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