Barbara Star’s September 2004 article in Active Trader magazine describes a version of the Commodity Channel Index (CCI) indicator that fits within the range of 0 to 100. She states that when this new indicator is used in conjunction with the regular CCI indicator the result is more consistent signals of market turning points.
You can create the CCI-Stochastic Indicator by following the instructions below:
1. Select New Indicator … from the Insert menu.
2. Select the Price Momentum category\Commodity Channel Index indicator, Periods = 5.
3. Select the Arithmetic category, Divide indicator.
4. Set the Numerator = Subtract indicator from the Arithmetic category, Subtract CCI – Min CCI over 5 periods (from the Basic category, Minimum value).
5. Set the Denominator = Subtract Max CCI over 5 periods – Min CCI over 5 periods.
6. Select the Averages category, Simple Moving Average indicator. Change Close to the Divide indicator created in steps 3 to 5 above multiplied by 100 (Arithmetic category, Multiply 2), and set the average periods to 3.
Users of NeuroShell Trader can go to the Tips from Active Trader and Other Sources section of the NeuroShell Trader free technical support Website to download a sample chart which includes the CCI-Stochastic indicator and a general Stochastic indicator. Trader Pro users may also optimize the time period parameters to customize the indicators for specific markets and issues, as well as potential stop-loss and profit levels as described by Star.
Note: NeuroShell Trader users who purchased John Ehlers’ Cybernetic Analysis Add-on will note that Ehlers applies Stochastics to his Center of Gravity, Cycle, and Relative Vigor Index in his indicators from Chapter 8. He takes the concept one step further by applying the Fisher Transform to the Stochastic versions to get razor sharp trading signals.