To clear something out from the beginning, although this indicator has Commodity in the title it is equally applicable to stocks as well. Thus, we well use it for stocks.
The CCI is a complicated indicator. The formula, or formulas to calculate it is/ are as follows below.
There are a few steps to calculate this indicator. For a period characterized by n the indicator requires the following calculations:
CCI = (Mean price for a period - Moving Average for the period) / 0.015 * D
Mean Price for a period = (High of the period + Low of the period + close for the period) / 3
Moving Average for the period is the Moving Average of the Mean price that was just calculated above.
D = 1/n Sum of i=1 to n [Absolute value of Mean price for the period - Moving Average M]
The result of CCI is a statistical measure of the movement of the price and we shall not discuss the technical jargon here.
The indicator is to be used as a percent value usually ranging from -100% to +100%. The rule for buying/ selling the stock is that buy the stock when the indicator is above 100% and sell the stock when the indicator fall below -100%.
After backtesting such indicator, the best result was found to be when n = 90. Although this is a good indicator, the values between +100% and -100% had some impact in the buying/ selling of the stock because it would keep the position outside the stock price and some trends would not be followed thus it would lose profitability. Perhaps it would have been better if instead of making the neutral period to be from +100% to -100%, we could make this to be 0. This was backtested with the stock being bought when the indicator crossed above 0% and sold when it crossed below 0%. The results were suprising because the indicator faired quite well and interesting ly it gave more profit.
The conclusion is that more testing is needed to show whether this indicator is useful to the stock trader. As the results show the indicator can be used without the margin of -100% to +100%.
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[I would request perhaps any readers who may find the topics discussed here as interesting, then they may want to contribute some money so I have available resources to write more topics. If you can submit a small payment for example to my paypal account email chrisk144@gmail.com then I can continue writing my blogs without delay, or hesitations because of my busy time/ schedule, or lack of resources. Thank you very much.]
The CCI is a complicated indicator. The formula, or formulas to calculate it is/ are as follows below.
There are a few steps to calculate this indicator. For a period characterized by n the indicator requires the following calculations:
CCI = (Mean price for a period - Moving Average for the period) / 0.015 * D
Mean Price for a period = (High of the period + Low of the period + close for the period) / 3
Moving Average for the period is the Moving Average of the Mean price that was just calculated above.
D = 1/n Sum of i=1 to n [Absolute value of Mean price for the period - Moving Average M]
The result of CCI is a statistical measure of the movement of the price and we shall not discuss the technical jargon here.
The indicator is to be used as a percent value usually ranging from -100% to +100%. The rule for buying/ selling the stock is that buy the stock when the indicator is above 100% and sell the stock when the indicator fall below -100%.
After backtesting such indicator, the best result was found to be when n = 90. Although this is a good indicator, the values between +100% and -100% had some impact in the buying/ selling of the stock because it would keep the position outside the stock price and some trends would not be followed thus it would lose profitability. Perhaps it would have been better if instead of making the neutral period to be from +100% to -100%, we could make this to be 0. This was backtested with the stock being bought when the indicator crossed above 0% and sold when it crossed below 0%. The results were suprising because the indicator faired quite well and interesting ly it gave more profit.
The conclusion is that more testing is needed to show whether this indicator is useful to the stock trader. As the results show the indicator can be used without the margin of -100% to +100%.
---------
[I would request perhaps any readers who may find the topics discussed here as interesting, then they may want to contribute some money so I have available resources to write more topics. If you can submit a small payment for example to my paypal account email chrisk144@gmail.com then I can continue writing my blogs without delay, or hesitations because of my busy time/ schedule, or lack of resources. Thank you very much.]
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