Using the Commodity Channel Index to Spot Trends
Commodities traders often use strategies including mean reversion and other technical indicators to trade commodities. In order to do so, they need to measure the volatility and momentum trends in a commodity.
The Commodity Channel Index (CCI) helps investors identify changes in momentum by analyzing the current price level relative to an average price level over a given period of time – typically 20 days. From this information, investors can spot momentum trends and reversions in a trade.
In this article, we’ll break down the concepts used in the CCI and explain how they can be analyzed in context with a few examples.
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