CCI Technical traders spend hours, days and months discussing the best CCI
indicator settings one should use. Apart from the default setting fourteen that
many CCI traders use, others use CCI settings 8, 10, 12, or 20. Sometimes,
a CCI trader will use a specific setting for a specific time frame. For example,
a CCI trader may only use the CCI period fourteen on the daily and weekly
chart, and use CCI period 10 on the hourly chart, but will also use CCI
period 12 on the monthly chart. It is quite amazing how traders do try all sort
of CCI settings to smooth the technical indicator or make it
perform better.
Furthermore,
beginners technical traders who are still trying to learn how to
use the CCI indicator do change their CCI settings more frequently than
anybody else. As you can see, one can spend a lot of time trying to find the
best CCI settings without making any profit.
After
trying all those settings most CCI traders settle with the CCI period
fourteen.
Why
The CCI
Default
Setting
Fourteen
The
default setting is based on the fact that there are four quarters in
one year
of fifty-two weeks. If one divides 52 by 4, one has thirteen weeks. Note that each
quarter is also formed of three months. Therefore, a quarterly candlestick bar is
composed of twelve weekly candlestick bar (3 × 4 = 12). As many regard the
number thirteen as a number that brings too much unexplained events, the
financial markets did opt for the number fourteen instead of thirteen or twelve.
Note also that the most influential market participants are hedge funds and
investment banks that are primarily position traders. In effect, the position traders
do use both the quarterly and weekly charts. In fact, the weekly chart is the quarterly
chart's signal time frame. As one can notice, the default setting is originally destined
for the
weekly chart in view to track the quarterly chart from the weekly
chart.
Nevertheless,
throughout the history of the technical trading, the default CCI
setting
fourteen has served well on most time frames provided that one masters how to use
the CCI indicator like a pro.
Truly,
the default setting is for the position traders that use the
quarterly chart to
pinpoint high probability trading opportunities and use the weekly chart trading signals.
The question that remains is what is the best CCI setting. Or what is the optimum CCI
setting? One can also ask what is the universal CCI
setting?
Apart
from every other CCI setting, there is the CCI period 30. In my
opinion, the best
CCI setting is thirty. Let me explain myself. When a financial instrument is trending up,
it rises above the moving average fifty. In fact during a bullish trend the MA fifty must
stay above MA 100, and the price should remain above the MA 50. Contrary to the
bullish trend, the MA 50 dwells below MA 100 during a bearish trend while the price
below MA fifty. To avoid a long explanation, please know that thirty is the sixty percent
of 50. Note also that if one is using MA 30 and MA 50 crossover, one is effectively
tracking the momentum of the MA 50.
Now,
let us not make matters more complex by dwelling on
the MA crossovers. As one
already knows, the CCI period thirty measures the deviation of the price from the MA 30.
In fact, one can replace the CCI 30 with the Bollinger bands thirty to a certain degree.
There are acute similarities between the CCI period x and the Bollinger bands (x, 2).
The CCI is also mimicking
(reflecting, duplicating or smoothing) the price price action.
One
of
the
reasons why I consider the CCI setting thirty as the best is because
is based
on the fact that the setting thirty is tracking the strength of the trend on any time frame.
Instead of using a relative fact (something that is only true in a certain condition), one is
working with a market stable data
(market truth).
It
does not matter whether one is on the daily or hourly chart, the
price will be above the
MA fifty during a bullish trend and below it in a down trend. Indeed, the TSTW 24 traders
use the moving average 50 and 100 to gauge the strength of the trend on the first best
time frame instead of relying on the lagging ADX technical
indicator.
Our
observations have shown that CCI setting thirty holds its ground on
all times frame
contrary to
other
settings. By using the CCI setting thirty, one is indirectly tracking
the first fifty candlestick
bars or the strength of the moving average fifty.
Does
Mean That CCI Setting Thirty Will Solve
All
Technical Trading Issues?
No!
The most important thing is to master how to use the CCI indicator.
The best CCI setting will help those that are tired to retest the
indicator on every time and concentrate on trading more
precisely.
Watch
the video below.
