Commodity Channel Index (CCI): Everything You Need to Know

What is a commodity channel index? 02 / 11 / 23 Kuantyay Sabaaymi Visitors: 376 Rating: ★★★★

Commodity Channel Index was created by Donald Lambert and is a very reliable tool for Forex traders. It helps to find new emerging trends and divergences between the indicator and the price. If it detects a divergence, it means that the trend is losing strength and a trend reversal is coming. In addition, the CCI indicator is also an oscillator, so it determines the oversold and overbought situation in the market.

What is the Commodity Channel Index?

The Commodity Channel Index is an oscillator that calculates the difference between the current price and the historical average price. If the Commodity Channel Index is above 0, the trend is bullish and the price is above the average.

Trading strategy for CCI

In order to see the CCI indicator at work, you can use the EURUSD chart. The overbought condition is represented at 200+ levels and the oversold condition at -200 levels by red lines. The pale green color means the zero level, and the royal blue color defines the 50+ and 50- levels. The red oscillator line shows the ICM TURBO. And the blue doji line represents the oscillator line.

The ICM indicator will create a buy signal if the ICM TURBO or ICM value crosses the 50+ level. If these values fall below the zero line, traders will exit the position.

Similarly, if the ICM or ICM turbo value falls below the -50 level, the indicator will generate a sell signal. If these values fall below the zero level, then one should exit the position.

Traders will find this indicator very useful as it displays buy and sell trigger levels depending on the trend and helps to avoid losses. Moreover, experienced traders find divergence in this indicator and enter more positions.

ICM can be implemented in other trading tools, no matter what keyword is added to it. It is an oscillator with different levels both down and up. It is also called a limitless indicator, which distinguishes it from oscillators that have stipulated maximum and minimum values. Therefore, you should determine overbought and oversold by this indicator in advance. This is an unrelated indicator, so the situation may persist for a long period. Therefore, ICM signals should always be confirmed by price action.

The ICM MT4 indicator helps Forex traders in the market to understand the price position of a security in relation to history. Therefore, traders can create successful trading strategies by understanding different profiles with the help of ICM indicators.

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