Commodity Channel Index (CCI) Indicator
Commodity Channel Index Indicator for MT4. CCI Oscillator to identify entry and exit points, divergences, Overbought and Oversold for forex trading.
Description
Donald Lambert originally developed the Commodity Channel Index Indicator. The CCI indicator is very useful to forex traders. Specifically to identify new trends and spot divergence between price and the indicator. The divergence shows the trend weakening, and a reversal is impending. Furthermore, as the Commodity Channel Index is an oscillator, it can identify potential overbought and oversold conditions.
Commodity Channel Index MT4 Indicator Trading Strategy
The above EURUSD H4 chart shows the Commodity Channel Index MT4 indicator in action. The indicator displays the overbought and oversold levels at +200 and -200 in bold RED lines. While the PALE GREEN color line indicates the ZERO, the ROYAL BLUE color lines mark the +50 and -50 values. Additionally, the RED color oscillator line shows the TURBO CCI. The DODGER BLUE color line shows the CCI oscillator line.
When to buy, when to sell?
The indicator generates a BUY signal when the Turbo CCI and CCI values go higher than the +50 trigger level. Traders can continue to hold the position and exit if the Turbo CCI and CCI values go below the ZERO line.
Similarly, if the Turbo CCI and CCI values go below the -50 trigger value. The indicator generates a SELL signal. The position can be exit if Turbo CCI and CCI values go above the ZERO line.
The Commodity Channel Index Indicator is very useful for the new forex traders since it shows the trigger levels to BUY or SELL based on the trend. On the other hand, experienced forex traders use the indicator to identify divergences and add more positions.
Forex traders can apply the Commodity Channel Index Indicator not only for commodity index. But on all trading instruments even though it has the word commodity. CCI indicator is an oscillator with unlimited levels to the positive or negative side. It’s called an unbound indicator and differs from other oscillators with fixed high and low values. Therefore forex traders must trade with caution when using the indicator for identifying oversold and overbought levels. As the indicator is unbound, the overbought and oversold conditions may prolong for a more extended period than expected. Therefore it is highly recommended to use price action to confirm the trading signals and overbought and oversold conditions.
Conclusion
The Commodity Channel Index MT4 indicator guides the Forex traders to understand the relative position of the price with regard to the previous history. As a result, Forex traders can design profitable trading strategies by understanding the strength or weakness of the current price change over the previous history. Forex traders highly appreciate this indicator’s ability to display divergences and the gaining or waning of current trend strength. However, traders must use price action to confirm the indicator signals.