CCI indicator stands for Commodity Channel Index and is an oscillating indicator for traders of all markets, not only for commodities, as the name could suggest. With CCI you can measure the current price of the asset about the average price in a given time interval. It is used to predict the reversal of the trend for long trades or to spot divergence or whether the market is oversold or overbought.
Key Takeaways🔑
| →CCI Indicator is a versatile tool for traders, helping identify potential trend reversals, divergences, and overbought/oversold conditions. |
| →At Olymp Trade, the CCI indicator can be easily added to any chart and customized based on individual trading strategies. |
| →Despite its usefulness, CCI should be used in conjunction with other indicators and technical analysis methods for more effective decision-making. |
Contents
How to attach CCI indicator to the chart at Olymp Trade
Naturally, you have to be logged in first. Then you choose the indicators’ icon (1). Search for CCI (2) and click on it. You will see the indicator below the price chart. It will be in the form of a green line and will oscillate between -200 and 200.
You can change the period of CCI. To do that simply click the pen icon located in the top right corner of the indicator window. You will see that the left settings sidebar will appear. There, you can change the period, the width, and the color of the CCI line. We recommend changing the period from default 20 to 14. That will make the CCI line react faster in response to price behavior. Do not go too low though, cause you can get too many false signals.
Commodity Channel Index normally ranges between -200 and 200. It can, however, extend beyond those extremes. If it crosses 200, it will be a sign of the market’s overbought. The prices should soon start to drop. If it crosses -200, it will mean that the market is oversold, thus the prices will rise.
Pros and Cons of Using CCI at Olymp Trade😀😔
Pros:
- CCI is a versatile tool that can indicate potential trend reversals and divergences.
- It is effective in identifying overbought and oversold conditions in the market.
- Settings can be customized to fit the user’s trading strategy.
Cons:
- CCI may give false signals in volatile markets.
- Like all indicators, it should not be used in isolation for decision-making.
- It requires a proper understanding and experience to interpret its signals accurately.
Comparison: CCI vs Other Trading Indicators
| CCI Indicator | Other Indicators |
|---|---|
| Capable of identifying potential trend reversals and overbought/oversold conditions. | Some indicators might only focus on one aspect, such as trend direction or momentum. |
| Requires practice and understanding to use effectively. | Some indicators may be more user-friendly for beginners. |
Trading with CCI on the Olymp Trade platform
CCI’s first trading method is to observe oversold and overbought areas. You know the market is overbought when the green line exceeds 100. When the CCI line crosses the 100 lines on its way down, it is surely time to sell. In the opposite situation, that means when the CCI indicator exceeds -100 so the market is oversold, the moment you notice the green line crosses -100 on its way up, you enter a buy position.
The other method to use the CCI indicator is to look out for divergences. On the above chart, you can notice, that the prices are going in one direction, and the Commodity Channel Index in a contrary direction. This is the divergence that informs you that the trend will surely change.
An oscillating Commodity Channel Index indicator is a comprehensive tool used in technical analysis. And it can boost your trading results on Olymp Trade. But first, try it on a practice account. Keep us updated on how it is going. Kindly use the comments section below.
All the best!
Frequently Asked Questions about the CCI Indicator💡
- Q: What is the CCI indicator primarily used for? A: The CCI indicator is primarily used to spot potential trend reversals, overbought or oversold conditions, and divergences.
- Q: Can I use the CCI indicator for all assets at Olymp Trade? A: Yes, the CCI indicator can be used for all assets available at Olymp Trade.
- Q: Can the CCI indicator be used alone to make trading decisions? A: While the CCI indicator can provide valuable insights, it is generally advised to use it in conjunction with other indicators and technical analysis methods.
- Q: What is the default period for the CCI indicator at Olymp Trade, and can it be changed? A: The default period for the CCI indicator at Olymp Trade is 20, but it can be adjusted based on individual trading strategies.
- Q: How does the CCI indicator determine overbought and oversold conditions? A: The CCI indicator signals overbought conditions when it crosses above +100 and oversold conditions when it crosses below -100.