CCI normalized
Technical Indicator Commodity Channel Index (Commodity Channel Index, CCI) measures the deviation of the commodity price from its average statistical price. High values of the index indicate that the price is unusually high compared to average and low - that is too low. Despite the name, Commodity Channel Index is applicable to any financial instrument not only to goods.
There are two main ways of using Commodity Channel Index:
- To find differences.
The divergence appears when the price reaches a new maximum, and Commodity Channel Index can not grow above the previous maximums. This classical divergence is normally followed by the price correction. - As an indicator perekuplennosti / resale.
Commodity Channel Index usually varies in the range of ± 100. Values above 100 indicate an overbought condition (and a probability of correcting decay), while values below 100 - about the overselling state (and the probability of correcting increase).
Calculation
D = Price - SMA (TP, N)
SMA (D, N) = SUM (D, N) / N Simple Moving Average
M = SMA (D, N) * 0,015
CCI = M / D
CCI does not refer to indicators operating with fixed values, which complicates comparison of different markets and time periods.
To solve this problem, the values are normalized within the next interval.
CCInorm = (CCIreal-CCImin) * (relMax-relMin) / (CCImax-CCImin) + relMin
Common parameters:
- Symbol - set a different graphic symbol, for example, to study the correlation.
- CCI period - the number of bars for the calculation of the CCI.
- Normalization period - the period of time during which we calculate the values of normalization.
- Period smoothing - the period for calculating the signal line (EMA).
- TimeFrame - allows you to see the ATR according to another timeframe.
- Maximum level - the highest level of normalized CCI (default - 100).
Benefits
- It shows the level of volatility in the relative form: more than yesterday, less than a month ago, etc.
- It simplifies the comparison of volatility of different currency pairs.
- Visually displays the level of correlation between the different pairs.
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