Thursday, July 15, 2010

Commodity Channel Index

Commodity Channel Index used in two ways condition :

1. Divergence search

Commodity Channel Index can not get higher than previous maximum, so when the new maximal price is reached, divergence appears. There is often price correction after that.

2. Oversold/overbought indicator

Commodity Channel Index fluctuation occurs between +100 and -100. When the rate of indicator is higher than +100, it indicates the overbought condition (probability of recession) and when the value is lower than -100 it shows oversold condition (probability of uprising). 

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