CCI Indicator Tip -- with David Moadel
welcome to looking at the markets with david modell i wanted to give you an important tip about
the cci indicator that's the commodity channel index and with the cci indicator a lot of people
i think are using it wrong what they oftentimes do is they'll just buy whenever the cci indicator
goes below negative 100 okay just to give you a quick recap on the cci indicator if the price
supposedly is above 100 then it's overbought or expensive and if it's below
negative 100 on the cci indicator then supposedly it's oversold or cheap okay
well i don't think it's as simple as that necessarily you want to have more nuance than that
you might want to add another indicator such as a moving average
to tell you whether you're in a downtrend like you see here or an uptrend and right now i'm using
apple stock the three minute candlestick chart but what i'm going to say here i believe could
possibly be applied to other time frames it doesn't have to be three minutes okay but
everything i'm saying today i don't want you to just believe it i want you to do your own research
test things out with demo trading or virtual trading don't try them out with real money okay
so yeah some people might just buy whenever the cci indicator goes below negative 100
but here's the thing if you're in a confirmed downtrend if the candles are just red
mostly red and just down down down look what can happen you can lose money over and over
you know the cci indicator went below negative 100 here and if you bought
there well just kept going down it went below negative 100 again here and then again here
and then here and then here and then here and here i mean you would have just kept losing trades
over and over and over all right so you might want to put a moving average up there for example
and if the candles are below the moving average then maybe you might say to yourself
okay i'm not going to take all these trades because we have a confirmed downtrend all right
and you might use i don't know the 20 period simple or exponential moving average or maybe a 50
period or whatever you like a 10 period whatever you like to use okay that's up to you just some
way to filter out all these bad trades hopefully all right there's no per there's no perfect way
here right there's no guarantee that any of this works but if you can filter out these trades when
there's a confirmed downtrend that would be good maybe put another just another indicator up there
all right so here's a better example you can see a confirmed uptrend all right the candles would
would probably be above a moving average sooner or later like if you put the 20 period up there
or something like that all right and so if you had bought here you would have done well
if you bought here these are all times when the cci indicator went below negative 100 okay but
you had a confirmed uptrend and so it went below here you could have bought you would have done
well you could have bought here and here and here i mean it just kept going up and up and up
all right as you can see all right so that is something to think about i don't want you to just
use the cci indicator by itself and then keep on losing trades all right i want you to know
what direction the overall trend is and that way you can filter out hopefully
some bad trades no guarantees but it's just something to think about
all right i hope this is helpful to you and if you want more help with trading or investing
i do offer coaching you can email me for the coaching at david modell gmail.com i
want to thank you for watching and for listening i will talk to you again soon
so
you