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# Сommodity Сhannel Index-understand flat, make money on trends

﻿The CCI (Commodity Channel Index) indicator was developed in 1980 by the exchange trader Donald Lambert as a result of an analysis of the volatility of commodities and confirmation of the hypothesis of price cyclicality. The tool is a good variant of how to make money on binary option in the currency and cryptocurrency markets and is included in the basic set of technical tools of all popular trading platforms.

Hypotheses about the cyclical nature of the market have a long history; it is enough to recall the Elliott wave theory. Lambert, in his book Commodity Channel Index as a Cyclical Trend Trading Tool, once again confirmed that price fluctuations are not a chaotic process and are subject to technical and fundamental goals.

The indicator can be used on any assets and gives a lot of winning binary signals that determine the beginning and end of the cycle, both in amplitude and time. The calculation algorithm assumes that if the price deviates from the moving average by the so-called “characteristic” deviation, we can talk about a probable trend change or the beginning of a correction.

CCI works like a typical oscillator – the result of calculations is a graph showing the current stage and characteristics of the market cycle. The exit from the extreme zones of + / - 100 gives a signal that you need to look for an entry point in the opposite direction to the current trend.

Calculation algorithm

How the formulas look like can be found in the textbook on technical analysis, it is important to understand the meaning of the main stages of calculation options trading signal

1. The "typical" price is determined, one of the main indicators of cash flow. It is the arithmetic average of the current Low, Close and High prices. If the estimated typical price is higher than the previous value, the flow is considered positive and the market should grow, if less, the flow is negative, the CCI decreases, as does the market as a whole;

2. The Moving Average of the typical price is calculated. Thus, random fluctuations are removed and the trend is seen more clearly. Especially on the cryptocurrency market;

3. The next one is the median (probable) deviation known in statistics as deviation. It is used to determine whether the market is overbought or oversold;

4. At the last stage, the Commodity Channel Index scales the result by multiplying by 0.015 or the "Lambert constant". Thus, 70-80% of the data will be between the levels of +/-100, which will allow a auto binary trader to filter out the periods of flat and no trend.

There are options in which you can change the value of the constant, but there is no data yet that the indicator in this case gives better results than the base one.

Settings and configuration features

The CCI indicator, as a standard tool of popular signals binary review, is shown in a separate terminal window. There is a balance (zero) line, the standard for oscillators, and two overbought and oversold levels: +/- 100 or +/- 200.

The longer the calculation period, the less volatile the indicator is and gives more reliable signals. Accordingly, a decrease in periods makes the chart very sensitive to “market noise” and a large number of false binary signals, especially in the extreme zones.

﻿The value of the periods for crypto trading signals should be selected individually for each asset, taking into account the average volatility, working timeframe, a trading strategy (scalping, swing trading, medium-or long - term trades) and depending on the comfortable trading style of the trader.

According to the author, the indicator should use the value of 1/3 of the full market cycle as the basic parameter. For example, if the average cycle is 1 month (25-30) days, then you should test the values of 10-12 periods. In the real market using trading computers multiple monitors, this strategy only works well in the futures market, where expiration dates are known as the end of local cycles and predicted volatility.

For currency pairs and medium-term exact binary options strategies (timeframes from H4 and higher), good results were obtained on periods of 20, for long-term transactions, at least 60 is recommended. For intraday trading on the main currency pairs, you can not change the standard 14 periods, the main thing is to identifying the presence of a trend, which can not be done alone by oscillators-additional confirmation is required, for example, from the Moving Average.

During the publication of important fundamental news and statistics, we do not open options 30 minutes before the news and 30 minutes after the publication; cautious traders can close current deals. To control the events, we use the economic calendar included in the all popular binary trading platform!

CCI indicator as a source of trading signals

The basic interpretation is the same as for all other technical oscillators: all movements within the range of +/- 100 will be considered random market movements that do not deserve the attention of the trader. When the chart goes to the extreme zones outside the range, you can start looking for trading binary signals.

Basic free binary signals:

• Open the CALL-option when the CCI chart crosses the "-100" level upward - exit from the oversold zone;
• Accordingly, we open the PUT-option when there was a top-down crossing of the "+100 " level - exit from the overbought zone;
• The reversal will be faster if +/- 200 lines are crossed.

Beginners in crypto trading are recommended to wait for additional confirmation in the form of crossing the zero level and only then open a trade.