Commodity Channel Index (often called the CCI) is another tool designed to help you make the right trades on the binary options market. It is an oscillator, and we will look at it as such in this article, although in some instances you will find that it is considered to be a simple trend indicator. This is why you may sometimes find it in different sections of your trading platform. Nevertheless, we are going to show you how to use it, so that you can add one more weapon to your arsenal in your battle for profit. Keep reading and see what this interesting tool has to offer.
Commodity Channel Index – CCI | Basic features
Just like any other oscillator, the Commodity Channel Index will also appear below your Binary Options Chart. Usually, the levels plotted on it by the brokers are 100 and -100, but don’t think the CCI can’t go pass those two numbers – it can and it does so fairly often, especially when a strong trend appears. These two levels are just another way of designating overbought and oversold territories, so the usual rules apply here: if the oscillator has hit its overbought level prepare to start buying put options, but if it’s in the oversold waters you want to go with call options. But that’s not the only way you can use the Commodity Channel Index. Stay with us and learn more about it in the next paragraph.
Commodity Channel Index – CCI | Another way to use it
Another thing you can do with the CCI is to plot the 0 level on it and use it as a reference point. In other words, every time the oscillator breaks it you can expect the trend to last. Therefore, if the 0 level is broken while the line is traveling downwards you will want to start buying put options (but only until it reaches the oversold area) and if it is broken in the other direction you want call options. One thing to be very careful about here is the Expiration Time because the Commodity Channel Index is well known for its sensitivity. It can change its behavior very quickly, so its period becomes extremely important. The oscillator is usually plotted on 14 periods, and we recommend you leave it at that until you become more familiar with the way it works.
Commodity Channel Index – CCI | Conclusion
And those are pretty much the main things you need to know when you’re using the Commodity Channel Index. It’s not very complicated, but you have to be ready to react quickly because the index in known to be very sensitive. Additionally, it’s always a good idea to confirm the data you’re getting this way with some other tool, just to keep things nice and safe. If you need more tips about trading on the binary options market, just take a look around our website. There are loads of articles like this one here.