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CCI
The Commodity Channel Index is an indicator designed for use in markets
that follow definite cyclical patterns. While the CCI does not determine
cycle lengths, if you have an idea of cycle length, the CCI can be a
valuable timing tool.
Formula:
Where:
n = number of periods
TPt = the current typical price:
MAt = current simple moving average
MD = mean deviation
Pn = price
Donald R. Lambert, who originated the CCI, suggests using a number of
periods less than one-third of the cycle length. Using this calculation,
seventy to eighty percent of random price fluctuations should fall within
the +100% to -100% range. If the CCI yields a value above +100%, a long
position may be indicated. When the CCI value falls below +100%, closing a
long position should be considered
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