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With the CCI(x), the zero line represents your simple moving average
of typical price ((H+L+C)/3) with a period of x. When the CCI
number is positive, that represents a mean deviation of TP above the
moving average and when it is a negative number, that mean deviation
of price is occurring below the moving average of TP.
The CCI is nothing more than a modified Z-score formula from your
old college statistics book where the standard deviation was
substituted for a mean deviation and then weighted to try and get
most of the values within the first two mean deviations.
Donald Lambert, the creator of the CCI formula, popped up in Las
Vegas at the December 2003 Woodies CCI Club meeting to talk about it
some. It turns out he used the mean deviation instead of the
standard deviation because it was a little more challenging to
program on his TI-59 calculator. Ironically, Donald Lambert never
used the CCI in his trading because he never traded. He is a long,
long term investor where he was picking stocks to hold for 10+
years. He did have a service at one time in the late 70's/early
80's where he would code up other trader's systems.
I don't know why you would ever want to try and limit it to a range
of 0-100 but I guess that's what technical traders do...tinker and
see what happens.
The CCI is an interesting indicator. In a lot of ways, it reminds
me of e-wave counts. They're always perfect in 20/20, but in real-
time, things aren't always what they at first appear. If you are
intraday trading, you'll get a far better read on near-term market
direction from market internals. At least, that's what I've found
(and I do consider myself highly proficient at reading the CCI).
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