As a classic oscillator, CCI measures the price deviation of the instrument from the average price. A large index value indicates that the price is too high compared to the average, and low – that the price is too low.
Using the CCI Indicator
Like most other oscillators, CCI was designed to determine the level of oversold and overbought. It solves this problem by measuring the ratio of the price to the moving average or the normal deviation from the moving average.
The indicator is a line that ranges from +300 … -300. Differing from others, it has no restrictions, and indications can go beyond the conditional border of 300 divisions. The indicator is located in the MetaTrader 4 standard technical tools package, in a separate window at the bottom of the price chart (the so-called «basement»).
Setting the indicator is quite simple: you set the period and the cost used in the calculations. The main purpose of CCI is to determine the moment of a trend reversal. At the same time, the oscillator line moves in the range 0 … +100, if the trend is bullish and 0 … -100, if the trend is bearish.
There are several ways to use CCI to generate an input signal.
1st option: entry after crossing signal lines. For example, a purchase at the intersection of the -100 mark is up-down, and a sale at the intersection of +100 from top to bottom.
2nd option: trade at the “0” mark. In this case, if the line crosses zero from the bottom up, it is recommended to start aggressive purchases. Accordingly, when crossing zero from top to bottom, there are active sales.