Forex Videos

The Commodity Channel Index is an oscillator that is commonly used to find breakouts, identify trends and spot reversals. The CCI is high when the price of the currency is a lot higher than its average price and low when the price of the currency is a lot lower than its average price. The indicator has no theoretical high or low and often oscillates around 0 with +100 and -100 as signal lines. The only input parameter for the indicator is the number of time periods used to calculate the average price. 20 Periods is the default value. When the CCI crosses above +100 upwards it indicates strengthening of bull trend and when line crosses below -100 it indicates strengthening of bear trend. Traders can use the crossing of these levels as a breakout signals.
When divergence is observed during a trend, for example when CCI crosses above or below 100 levels with new highs or lows being made this indicates that the trend is weakening. Traders can use this opportunity to look out for reversals to close their winning positions. When there is a downward crossing of +100 line or a upward crossing of -100 line after a large trend, a reversal or large retracement may be anticipated.