Commodity Channel Index trading indicator

The Commodity Channel Index (CCI) is a technical analysis tool that measures the relative distance between an asset's price from its statistical average.

Formula:

CCI applies a moving average to the typical price property (mean of high, low, and close prices) and calculates the standard deviation over a chosen period. The CCI formula then divides the mean deviation by the standard deviation multiplied by 0.015.

Key Takeaways:

1. The CCI is a flexible, widely used tool that helps traders recognize overbought and oversold market conditions, assess momentum, and spot potential reversals.
2. The Asset classes best suited to CCI are commodities and forex.

Counterarguments:

1. CCI can generate frequent false signals when market conditions are volatile or choppy.
2. CCI is less useful when markets have fewer percentage movements.
3. CCI is more useful for short-term trading.