When traders are provided with the right information, they are able to make more successful trades. When Donald Lambert developed the Commodity Channel Index, he based his design on the concept that commodities, stocks and currency pairs always advanced in cycles with lows and highs arriving at periodic intervals.

Consequently, a trader can best use this indicator to assist him in detecting these cyclical movements on the financial markets. Knowing when a price is about to hit a high or a low region is crucial in knowing the next set of movements that a price will take.

This means we are getting the relative location of a current price value in relation to how volatile the price action has been historically. High values show that prices are unusually high compared to average prices whereas low values indicate that prices are unusually low. Again, let us remind our readers that contrary to its name, the CCI can be used effectively on any type of asset, and not just commodities. The index is calculated as the difference between the typical price of an asset and its simple moving average, divided by the mean absolute deviation of the typical price.

The index is usually scaled by an inverse factor of 0. where SMA is the simple moving average, σ is the mean absolute deviation, and Pt is the Typical Price computed as such. For the purposes of scaling, Lambert has set the constant at 0. This means that CCI can fluctuate above and below zero. To summarize the calculation, the CCI can be computed using the following steps:.

Binary options traders use the commodity channel index to help identify price reversals, price extremes and trend strength. As with using most indicators, this index should be used in conjunction with other aspects of technical analysis. CCI can be considered as a momentum oscillator. In addition to momentum, CCI can also indicate trading volume and other technical assessment parameters. Traders should be able to use CCI to find out market sentiment as shown in the charts.

CCI is also often used to detect divergent movement from price trends as an overbought and oversold indicator. The index allows traders to draw patterns on it and trade according to those patterns. The CCI is therefore quite similar to Bollinger Bands in this respect. But CCI is presented as an indicator, rather than depicting overbought and oversold levels. However, there is a way to trade with CCI and the recordings that are coming with this educational series are showing you how to do that.

First of all, one needs to apply the indicator on a chart and we are using the Jforex trading platform for this educational series so make sure you know where to find the CCI and how to apply it to a chart.

The next thing to do is to look at the period that is offered and make sure you are using the default settings, the It is worth mentioning that the CCI is considered to be an oscillator but sometimes on some different trading platforms it is also considered a trend indicator. However, only the fact that it is plotted below the actual chart represents the hard proof it is an oscillator. Like all oscillators in the world, it is travelling between some levels that are considered to be overbought or oversold levels.

In other words, in an overbought area one needs to look for buying put options, while in an oversold area one needs to look for call options. One important thing that needs to be mentioned here is the fact that the CCI is acting or reacting faster than the other oscillators, like RSI for example.

In other words, the CCI is going into overbought and oversold territory also when market is ranging and sometimes even when ranges are really small, like in the Asian session for example, on the hourly chart CCI still makes a move above or below This is the classical way to use the CCI but I would insist that this works on the bigger time frames and not on the lower ones.

Another way is to look at it as a signal for market continuation in the same direction and this can be done using the 0 level. The way to go is to plot the 0 level on the territory the CCI is travelling and by the time we have a cross below the 0 level it means the CCI is travelling for the , so put options are still favored.

The opposite is true as well: by the time the CCI is breaking above the 0 level it means that call options are still favored as the mark comes into play.

Commodity Channel Index or the CCI as it is known is a trend indicator and it is to be offered by any respectable broker and any trading platform. It is looking like an oscillator, having overbought and oversold levels, but actually it shows trending conditions and allows a trader to jump into a trade in a market that is trending.

The CCI travels into positive and negative territory and the decisive levels offered by brokers on the standard or default setup are the and However, there is a way to trade with CCI and the recordings that are coming with this educational series are showing you how to do that. First of all, one needs to apply the indicator on a chart and we are using the Jforex trading platform for this educational series so make sure you know where to find the CCI and how to apply it to a chart.

The next thing to do is to look at the period that is offered and make sure you are using the default settings, the It is worth mentioning that the CCI is considered to be an oscillator but sometimes on some different trading platforms it is also considered a trend indicator. However, only the fact that it is plotted below the actual chart represents the hard proof it is an oscillator. Like all oscillators in the world, it is travelling between some levels that are considered to be overbought or oversold levels.

In other words, in an overbought area one needs to look for buying put options, while in an oversold area one needs to look for call options. One important thing that needs to be mentioned here is the fact that the CCI is acting or reacting faster than the other oscillators, like RSI for example.

In other words, the CCI is going into overbought and oversold territory also when market is ranging and sometimes even when ranges are really small, like in the Asian session for example, on the hourly chart CCI still makes a move above or below This is the classical way to use the CCI but I would insist that this works on the bigger time frames and not on the lower ones.

Another way is to look at it as a signal for market continuation in the same direction and this can be done using the 0 level. The way to go is to plot the 0 level on the territory the CCI is travelling and by the time we have a cross below the 0 level it means the CCI is travelling for the , so put options are still favored.

The opposite is true as well: by the time the CCI is breaking above the 0 level it means that call options are still favored as the mark comes into play. The same is true for the period that it is being involved.

If the oscillator takes into account 14 periods, it means values will be plotted based on the last 14 candles, but if the period is, say , it will take candles. Definitely that the overbought and oversold levels are going to be difficult to be reached with a bigger period involved, so mind the gap. Like any oscillator, it may show a divergence but from my experience this divergence is not that relevant like in the case of the RSI Relative Strength Index.

This is why trading binary options is appealing to the human nature but again, sound money management is a must like it is a must in each and every trading area. More details about the CCI, how to plot it and what to do with it can be seen in the two video recordings that are going with this chapter in our Binary Options Academy. Binary options indicators Binary Options Strategies.

Applying CCI when Trading Binary Options However, there is a way to trade with CCI and the recordings that are coming with this educational series are showing you how to do that. Watch Out for CCI Sensitivity in Turbulent Times One important thing that needs to be mentioned here is the fact that the CCI is acting or reacting faster than the other oscillators, like RSI for example.

Using the 0 Level with CCI Another way is to look at it as a signal for market continuation in the same direction and this can be done using the 0 level. Divergences — CCI vs RSI Like any oscillator, it may show a divergence but from my experience this divergence is not that relevant like in the case of the RSI Relative Strength Index.

This category only includes cookies that ensures basic functionalities and security features of the website. Applying CCI when Trading Binary Options However, there is a way to trade with CCI and the recordings that are coming with this educational series are showing you how to do that. In other words, in an overbought area one needs to look for buying put options, while in an oversold area one needs to look for call options. But CCI is presented as an indicator, rather than depicting overbought and oversold levels. To summarize the calculation, the CCI can be computed using the following steps:. Close Privacy Overview This website uses cookies to improve your experience while you navigate through the website.

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