It is like the overbought and oversold indicator, but the working formula is different. Forex traders use the CCI indicator on multiple timeframes to determine the direction of trend and trading signals.
Working of CCI indicator in mt4
The commodity channel index indicator also acts as an oscillator around the zero line. If the oscillator’s value is above 100, the price trend is strong, and the market is strongly bullish. However, if the oscillator’s value is below -100, the price trend is weak, and the market is entirely bearish.
The main feature of this indicator is that it shows the indicator values of multiple timeframes in a single window. It shows the values from the monthly timeframe to the 15-minute timeframe. Due to this feature, you can use the confluence of multiple timeframes to increase the probability of winning in a trade setup.
For example, if two to three timeframes indicate a bullish trend, you should trade only in the bullish direction. If the trend direction does not match the trend direction of higher timeframes, you should avoid trading in such cases.
Signals are based on multi-timeframe confluence. You can also use this indicator in your way.
Place a buy trade if the CCI oscillator value crosses the +100 on the current timeframe and on the higher timeframe and close the trade when the value decreases below 100.
Place a sell trade if the CCI oscillator value crosses the -100 on a current and higher timeframe. Close the trade if the value increases above -100.
The commodity channel index indicator in mt4 displays the indicator values of multiple timeframes on a single screen. This feature helps retail traders to make high probability decisions based on various timeframes.
You can also use the CCI indicator as a confluence with other technical tools.