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Commodity Channel Index |
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A momentum indicator, the Commodity Channel Index (CCI) is normally used largely to identify the starting and finishing of cycles in the futures market and also to identify opportunities to buy and sell. The CCI can also be utilized to signal overbought and oversold markets, not unlike an oscillator.
The CCI is designed to position 70-80% of all price activity between +100 and -100 on its vertical scale. Many investors who use this strategy hold that a long position is indicated when the CCI exceeds +100 while a short position is indicated when the CCI falls below –100, but this formula should be based more on the individual's market analysis.
Similar to other oscillators, CCI may also utilize to signal overbought and oversold markets. Levels above the CCI long line may point to an overbought market, and breakouts below the CCI short line can indicate an oversold market. Because of the amount of time it spends between the CCI long and CCI short lines, it should be noted that it is not unusual for CCI to miss the early part of a new move. Many investors who used this strategy are of the opinion that CCI crossing above or below zero identifies market conditions before the CCI long and CCI short lines are crossed.
DIRECTIONAL MOVEMENT INDEX
DMI is a trend indicator developed by Welles Wilder Jr., and is consists of three plots; ADX, DMI+ and DMI-. It was fashioned to track and identify sustainable price directions, also known as trends, as well as whether or not a directional movement exists in the market. This indicator can also be used to spot non-trending markets, or the weakening of an ongoing trend.
Positive and negative price movement (DM+ and DM-) are calculated separately and incorporated within the calculation of ADX that gauges the degree and direction of movement, in particular identifying sustained movement in one direction. DM+ and DM- are plotted along with ADX to facilitate identifying the individual elements of price movement. ADX is calculated by taking the running average of the difference between DM+ and DM- and dividing the result by the sum of DM+ and DM-.
A rising ADX line above the 25-30 level indicates the existence of a trend, although it does not identify the direction in which it's going. The position of DM+ and DM- provides mathematical corroboration of trend direction, and the spread between the two helps to identify the strength of the underlying movement. A high reading of ADX (above 40) that starts falling may indicate either a deceleration in the current trend and, in the case of an extreme price reversal, the end of the trend. It is important at these times to ensure a good trailing stop is in place.
A low ADX value (below 20) usually indicates a non-directional market with low volatility, while a cross above 20 may indicate the surfacing of a stronger movement that may grow into a trend (either up or down indicated by whether DM+ is greater or less than DM-).
Although in many cases a falling ADX line above 30 may point to the trend being complete, there are occasions where ADX reacts to a brief correction that causes it do decline. Nevertheless, make sure that other indicators or analysis techniques are being utilized to verify that the trend is complete.
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| Symbol |
Rate |
| GBP:CHF |
1.747703 |
| GBP:JPY |
155.484239 |
| GBP:USD |
1.638403 |
| NZD:USD |
0.627050 |
| EUR:CAD |
1.545998 |
| EUR:CHF |
1.516857 |
| EUR:GBP |
0.867915 |
| EUR:JPY |
134.947096 |
| EUR:USD |
1.421994 |
| AUD:JPY |
76.394373 |
| AUD:USD |
0.805000 |
| USD:CAD |
1.087204 |
| USD:CHF |
1.066711 |
| USD:JPY |
94.899879 |
| USD:SEK |
7.613010 |
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Disclimer: This website is for informational purposes only and is not intended to provide
specific commercial, financial, investment, accounting, tax, or legal advice.
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© ForexCenter.com, 2005, All Rights Reserved
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