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DescriptionThe CCI is an indicator with a trend-following orientation. A number is calculated to represent the distance of the price to its Moving Average.
CalculationFirst of all, the arithmetic mean of the high, low and close of a day are calculated. With this so-called "Typical Price", the mean deviation to the SMA is calculated.
Formulawhere SK(t) is the significant price at the time t, SMA(t) is the Simple Moving Average at the time t, FKT is an arbitrary factor suggested by Lambert to be 0.015, and SD(t) is determined as follows:
Fehler! Unbekanntes Schalterargument.
ParametersAs the number of observation days (or weeks), n can assume values between 1 and 500. The standard setting is n = 20.
InterpretationThe measurement of the price's distance to its moving average thus makes it possible to measure the trend strength. If the CCI moves within certain limits (according to Lambert, with FKT = 0.015, between -100 and 100), the market is trendless.
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