Commodity Index And Forex Together Sounds Puzzling
What is CCI?
What is CCI?
Well, CCI stands for Commodity Channel Index and is defined as the index that is used as a technical indicator tool that enables to understand the cyclical patterns in the commodities.
Those commodities that trade and the changes in the cycles occur on sixty-day basis for such commodity trades an analyst will use twenty-day CCI to understand the influence of the commodity-trading index on Forex trade.
Calculation of CCI:
In order to calculate the CCI the following things are needed- Typical price (TP), Simple Moving Average of Typical price (SMATP) and the Mean Deviation.
TP= (High + Low)/3
Commodity Channel Index= (TP-SMTP)/ (0.15 x Mean Deviation)
Where, 0.15 is a constant
If the value of CCI is greater than +100 then the trend is trending upwards and this indicates about the buying signals. Inversely, if the CCI value is less then -100 that indicate selling signal.
CCI in combination with other indicators gives relevant information and facts to the traders and analysts about the price actions and the inflows of the Forex trading.
When RSI (Relative Strength Index) and LRS (Linear Regression Slope) and a chart pattern combined with the CCI it becomes a strong guidance to make Forex trade better.
It is always good to correlate the trade with the indicators and assess the Forex market before entering into the actual trading.
Benefits of CCI:
This can be used as a tool for trading in market securities like stocks, commodities and Forex.
It is easily available and accessible through software application and quality representation in graphical formats.
It signifies where the price of securities rests in relation to the CCI range enabling traders to depict the source of entry and exit from the trading.
It also points out the overbought and oversold position of the stock, commodity and securities.
It provides continuous calculation of the trading trends.
The underlying features of the CCI mentioned here are beneficial to extend the Forex trading scope and provides traders an edge in their trading analysis.
The CCI allows the trader to examine and collect facts about the Forex trading trends to make further movement in the Forex trading by correlating all the points.