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Negative divergence
over +100 increases the signal force when CCI crosses +100 from top to bottom. The condition for this situation is 2 consecutive maxima on the indicator above +100 when the second maximum is under the first one on the indicator, but above on the chart of prices . |
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one can treat break of trend lines formed on the indicator as input or output signals from a position. At overbought - above +100 - the break of the trend line downwards is supposed a sale signal and at an oversold level - below-100 - the break of the trend line upwards is supposed a signal to growth of the market. Thus these lines are also based on the connection of consecutive maxima or minima .
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The drawbacks
The CCI works effectively only in cases when the market is really subject to rather permanent cycles because it was developed definitely for the cyclic markets. That's why it's more problematic to choose an optimum period if cycles in foreign exchange trading are difficultly distinguished in market.
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In foreign exchange trading,
we advise you to test this indicator in demo account trading before using it in real account.
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