CCI Variations with Alternative Volatility Measures and Smoothing

Summary

This note describes a modified Commodity Channel Index that can replace the usual mean absolute deviation with standard deviation or average true range. It also offers optional smoothing and color changes when the indicator crosses zero or changes slope. These settings give traders different ways to display the oscillator and its direction.

The note says that without smoothing, zero-line crossings remain the same as in the regular CCI, even when the volatility measure changes. However, indicator levels and slope behavior can differ, so familiar thresholds may need adjustment. It suggests using color changes as signals but provides no tested rules, performance evidence, or guidance on position sizing and risk. The settings should therefore be treated as indicator variations rather than a validated trading strategy.

Key ideas

• The standard CCI divides the difference between price and its average by a scaled mean absolute deviation.
• The variation can use standard deviation or average true range instead of mean absolute deviation.
• Optional smoothing can be applied to the modified indicator.
• Without smoothing, changing the volatility measure preserves the regular CCI's zero crossings, according to the note.
• Indicator levels and slope can change, so traders may need to reassess level-based rules.
• Color changes at zero crossings or slope shifts are suggested as potential signals, without performance evidence.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.