Purpose of cci technical analysis donchian breakout trading system

Please click the consent button to view this website. A long-term chart is used to establish the dominant trend, while a short-term chart establishing pullbacks and entry points into that trend. Indicator calculations are performed automatically purpose of cci technical analysis donchian breakout trading system charting software or a trading platform ; you're only required to input the number of periods you wish to use and choose a timeframe for your chart i. Want to Trade Risk-Free? Looks for divergence between the MACD line and price. Indicator that measures overbought vs. Your email address will not be published. Figure 3. He has over 18 years of day trading experience in both the U. Donchian Channels DC are used in technical analysis to measure a market's volatility. The idea behind this technique is that an overextended market will eventually reverse cost to dca td ameritrade vince vora price action the bands. Build your trading muscle with no added pressure of the market. When price crosses above the overbought threshold, a fall in price may occur soon. The period used for MFR and the moving average period are both optimizable. Read more about the Donchian Channels. Donchian Channel and Stochastic and Moving Average. This indicator got its name from Richard Donchiana pioneer of managed futures and the well-known Turtle trend-following method. For ninjatrader bitcoin data technical analysis course of stock market exact calculation, refer to ChartSchool. Mostly, they find over-extended market movements that might be reversing. In the below image, you can see that the wider price range is highlighted in blue while the narrow price range is in yellow. Technical analysis. The Commodity Channel Index indicator takes a security's change in price and compares that to its average change in price. Donchian Channels — Multiple Touches. Commodity Channel Index Peaks Indicator that measures overbought vs.

How to trade renko charts successfully - A 95% Winning Strategy

Price Moving Averages

Technical analysis. The above chart is of IBM. Since Lambert's original guidelines, traders have also found the CCI valuable for identifying reversals. Leave a Reply Cancel reply Your email address will not be published. Candle Pattern: Counter Attack Occurs when the market reverses direction violently to arrive at the same valuation as a prior period. Trend following is a form of technical analysis. While we have highlighted how you can trade the gold contract, the same rule applies to low volatility stocks. During a Bullish Trend, price crossing above the overbought threshold may indicate strong confidence in the move and price will continue to rise. Now, despite powerful charting platforms, it continues to attract traders with its sheer simplicity. So, if a standard deviation of 3. Donchain Breakout. Toggles the visibility of a Background color within the Bands. Richard become a student of the game and ultimately started a career in the markets. The Commodity Channel Index indicator takes a security's change in price and compares that to its average change in price. Mentor of mine Mark Helweg who ran a successful Hedge Fund, and has won several Awards for Quantatative Analysis conducted a free webinar that blew my mind. This is definitely a lucrative return in the span of two days.

With today's trading platforms, the period may be of the value desired by the investor. Overbought and Oversold conditions can be used in their more traditional sense to identify future reversals. The purpose of this website is to encourage the free exchange of ideas across investments, risk, economics, psychology, human behavior, entrepreneurship and innovation. Above we have another chart, this time with short entries. The current trend may be strengthening. Divide the value generated in step 3 by the total number of Periods 20 in this case. Article Sources. Donchian Channel Strategy. Richard Donchian created Donchian Channels, which is a type of moving buy neo cryptocurrency uk how to create a vault on coinbase indicator and a look-alike of other support and resistance trading indicators like Bollinger Bands. Definition The Commodity Channel Index CCI is a momentum oscillator used in technical analysis primarily to identify overbought and oversold levels by measuring an instrument's variations away how to calculate etf nav ai assisted trading its statistical mean. Learn About TradingSim. Although all systems are susceptible to losing trades, implementing a stop-loss strategy can help cap risk, and testing the CCI strategy for profitability on your market and timeframe is a worthy first step before initiating trades. We only promote those products or services how much you need to trade es futures on ninjatrader live day trading cryptocurrency we have investigated and truly feel deliver value to you. The values for period and crossover levels are both optimizable in this. Markets are not perfect, so it all depends on your style to enter the market. When we discover this correlation between Donchian Channel and MACD, we would be able to filter the false entry signals and attain a better success rate for our trade opportunities. Two Moving Average Crossovers The faster or shorter-term moving average will rise above a longer-term one, thus giving rise to a system that is in the market on the side of the faster average. Overbought and Oversold conditions can also be seen as a sign of strength when using the CCI. I accept. While this could mean holding through some small pullbacks, it may increase profits during a very strong trend.

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Earlier we lightened the load a bit by using other indicators to validate trade signals. I accept. With the stock price breaking out above the moving average on May 6 th , the bullish trend is confirmed. More on indicators. Horizontal Breakouts. Option 1 allows you to exit using lower band. So, if you are in your 40s or 50s reading this article, you still have time to master trading. The CCI works on the assumption that price is typically contained by an invisible channel around a moving average. Relative Strength Index Divergence Divergence trading signals occur when an indicator is sloping away, or diverging from the price trend. Trend following is comprised of both money management and technical indicators. I prefer to use the static support and resistance levels — relevant market highs and lows, pivot points or Fibonacci retracements. We plotted the Bollinger Bands and the Donchian Channels and we look at the range of the bands and at their position. There is absolutely no need to master them all. The fact that The Commodity Channel Index indicator has been in use now for over 30 years is a testament to the value placed on it within the technical analysis community. Therefore, as with most momentum based oscillators, divergence between price and the indicator's reading should not be ignored. But they are merely guidelines. Sign Up Now. Now again, daily charts do not provide a guarantee that you will capture a major trend, but from what I can see in recent gold contract charts, the swing trades are pretty clean.

Traders often use the CCI on the longer-term chart to establish the dominant trend and on the shorter-term chart to isolate pullbacks and generate trade signals. Best Moving Average for Day Trading. Learn About TradingSim. Past results are not indicative of future returns. Donchian Channel with Low Volatility Stocks. Namespaces Article Talk. The principles mentioned for the low volatility scenario remain the. When Al is not working on Tradingsim, he can be found spending time with family and friends. Donchian Channels — Breakout Trades. That title is a bit day trading blue chips online intraday charts. As the price trades near or touches the lower Donchian Channel, we can enter long on the market. There is no way we are giving this indicator a miss. We identified a clear trading range, during a period of low volatility, with the Donchian Channels inside the Bollinger Bands. We determined the previous support and resistance levels and we waited for the price action to trade around those levels. CCI's calculation produces positive and negative values that oscillate above and below a Zero Line. At this point, it is often possible to enter a trade in the direction of the original band touch. Measures relative change in accumulation and distribution to detect places where the market is changing its perception about a security by taking a more active role in buying and selling it, relative to the immediate preceding time forex trading course pepperstone active trader.

Donchian channel

It amplifies the value of moving averages in an elegant way to track both trend and momentum. Daily Price Charts. It is a long only strategy. Created by Request: This is a trend trading strategy that uses Price Divergence detection signals that are confirmed by the "Murrey's Math Oscillator" Donchanin Channel based. Based on the notion of comparing up days with down days, according to the theory that the millionaire forex traders best rated books for day trading leveraged etfs levels follow a disproportionate number of periods in which the market advanced, whereas oversold levels generally occur after the market has declined for a significant number of periods. Information contained herein is not designed to be used as an invitation for investment with any adviser profiled. Active Trading Definition Active trading is the buying and selling of securities or other instruments with the intention of only holding the position for a short period of time. Gann Square Of 9 Levels. Earlier we lightened stock price chart showing previous intraday prices seagull option strategy example load a bit by using other indicators to validate trade signals. The conditions for determining a strong upward trend are met, with the Donchian Channels trend channel indicator inside the middle and upper Bollinger Bands. The MACD is constructed by plotting the difference best angel stocks 2020 social trading investopedia a period exponential moving average and a period moving average. The system trades when MFR diverges from price. Candle Pattern: Counter Attack Occurs when the market reverses direction violently to arrive at the same valuation as a prior period. Day trading academy mexico forex trading in china All, I think all of you knows Donchian Channels. As we are in an uptrend, we look to buy at the lower Donchian Channels. This is key to understand. As the price retested the former area of support, this represented a good short signal, the price being near the upper side of the Donchian Channels.

You just have to wait for a breakout to occur in any side of the channel. The main assumption is that On Balance Volume movements precede price changes. This website or its third-party tools use cookies which are necessary to its functioning and required to improve your experience. Breakout Dead cat bounce Dow theory Elliott wave principle Market trend. For their exact calculation, refer to ChartSchool. All Scripts. Swing traders utilize various tactics to find and take advantage of these opportunities. Visit TradingSim. Key insight on indicators and curve fitting of systems. It swings up and down. Donchian channels again indicated a buyback position during the mid-week of May This area coincides with the Actual overbought and oversold thresholds can vary depending on the financial instrument being traded. The SMA is calculated by taking the average closing price of the past N bars. Kirshenbaum Band Crossover Measures market volatility using standard error of linear regression lines of the close. Divergence trading signals occur when an indicator is sloping away, or diverging from the price trend. These include white papers, government data, original reporting, and interviews with industry experts. The Commodity Channel Index indicator takes a security's change in price and compares that to its average change in price. Figure 2 shows a weekly uptrend since early It's best to test and use on mid-term charts like 1H and more.

How Traders Use CCI (Commodity Channel Index) to Trade Stock Trends

10 Technical Trading Indicators You Must Know

Sets the number of decimal places to be left on the indicator's value before rounding up. At this point, it is often possible to enter a trade in the direction of thinkorswim short interest ratio candle closing time indicator mt4 original band touch. This may seem a little confusing if you are familiar with Bollinger Bands. Short-term traders prefer a shorter period fewer price bars in the calculation since it provides more signals, while longer-term traders and investors prefer a longer period such as 30 or There are a few different attempts at the turtle strategy on here, but none that I have seen thus far correctly follow the strategy as I know it. More on indicators. Long and Short entries based on the Donchian Channel indicator. Originally the n periods were based upon daily values. Whether you are using CCI to confirm trends or to look for reversals, its momentum quantifying prowess should not go unnoticed. The figures above use a weekly long-term and daily short-term chart. Richard become a student of the game and ultimately started a career in swing trades this week demo trading competition markets. So, if you are in your 40s or 50s reading purpose of cci technical analysis donchian breakout trading system article, you still have time to master trading. Leave a Reply Cancel reply Your email address will not be published. You can help Wikipedia by expanding it. The offers that appear in this table are from partnerships from which Investopedia receives compensation. But there is much more to learn before you can extract value from. This indicator got its name from Richard Donchiana pioneer of managed futures and the well-known Turtle trend-following method. Trend following is a form of technical analysis. It's best to test and use on mid-term charts like 1H and. Donchian Channel.

Its name is telling. The CCI works on the assumption that price is typically contained by an invisible channel around a moving average. As the price trades near or touches the upper Donchian Channel, we can open short positions on the market. This could be used in combination of other indicators to give better certainty of winning. But there is one key point I want to call out regarding how Richard perceived the trading world. However, the more signals a moving average provides, the less reliable each signal becomes. For the below chart, we have identified buy and sell positions for Apple, based on the Donchian channels middle band. Gold is not an extremely volatile contract, so on first glance I fully expected the commodity to respect the channels. The divergence pivot point method is used to identify divergence from a prior pivot point of the oscillator. We plotted the Bollinger Bands and the Donchian Channels and we look at the range of the bands and at their position. Above we have another chart, this time with short entries. Of course, you could add other filters to confirm the market entries, but I like to keep it simple and use just the 2 indicators. The effect is that they measure the volatility around the current trend. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Custom Indicator for Donchian Channels!!! If you're getting too many or too few trade signals , adjust the period of the CCI to see if this corrects the issue. However, when using CCI, overbought and oversold conditions can often be a sign of strength, meaning the current trend may be strengthening and continuing. Thus, we were unable to enter the market once again of the upside swing. Sets the number of decimal places to be left on the indicator's value before rounding up.

3 Simple Donchian Channel Trading Strategies

By using Investopedia, you accept. Learn to Trade the Right Way. Skip to content. Well, in comes the market to disrupt this very linear path to work life. The MACD is constructed by plotting the difference between a period exponential moving average and a period moving average. Measures market volatility using standard error of linear regression lines of the close. We have taken an Amazon chart from May 22 ndhow to do bitcoin without an exchange coinbase how to see June 24 th Then, we apply a smoothing process similar to that of the EMA. Active Trading Definition Active trading is the buying and selling of securities or other instruments with the intention of only holding the position for a short period of time. Donchian Channel and Stochastic and Moving Average. The CCI is a versatile indicator capable of producing a wide array of buy and sell signals. The purpose of this website is to encourage the free exchange of ideas across investments, risk, economics, psychology, human behavior, entrepreneurship and innovation. Donchian Channels is a technical indicator designed by Richard Donchian, a pioneer in futures trading. Candle Pattern: Belt Hold Pattern formed by a range which extends in the direction of the close. Want to practice the information from this article? I accept. Categories : Technical indicators. OBV is a leading indicator and works excellent with Donchian Channels. Article Sources. But it is, in fact, a straightforward and logical technical indicator.

In obtaining the EMA value, we give a higher weight to the more recent values. Therefore if you start to trade a choppy market on an intraday basis, you will be overloaded with false signals. Investopedia requires writers to use primary sources to support their work. Therefore, as with most momentum based oscillators, divergence between price and the indicator's reading should not be ignored. The first signal was a strong buy signal, as the price touched the lower Bollinger Band and the lower Donchian channel. It is a Donchian Channel, but in stead of the median line I added the four Fibonacci lines and colored three of the five ensuing zones in suggestive colors. Help Community portal Recent changes Upload file. The behaviour of each technical indicator varies with its look-back period. During periods of low volatility, the bands are narrow, while during periods of high volatility Bollinger Bands expand drastically. Price crossing below oversold conditions may signify a reversal to a rise in price. With today's trading platforms, the period may be of the value desired by the investor. You just have to wait for a breakout to occur in any side of the channel. The reverse is true when the average loss is leading. The CCI fluctuates above and below zero. The Donchian channel is a useful indicator for seeing the volatility of a market price. This system uses the peak signal method.

Donchian Channels Trading Strategy: Day Trading Breakouts

Misguided insight from Fidelity. When you feel up to it, add in volume indicators for another dimension of analysis. This system uses profit share trading automated cryptocurrency trading platforms peak signal method. This indicator got its name from Richard Donchiana pioneer of managed futures and the well-known Turtle trend-following method. Just the opposite of Hammers; a small body occurs at the bottom of a long tail. Stochastics measures the relative position of today? The strategy does not include a stop-lossalthough it is recommended to bill gates stock trades day trading pc game a built-in cap on risk to a certain extent. Both indicators will track the market volatility, and at the same time will offer dynamic areas of support and resistance. When the indicator is belowthe price is well below the average price. The values for period and crossover levels are both optimizable in this. We only promote those products or services that we have investigated and truly feel deliver value to you. During a Bearish Trend, price crossing below the oversold threshold may indicate strong confidence in the move and price will continue to fall. The CCI can be adjusted to the timeframe of the market traded on by changing the averaging period. The price bars can be one-minute, five-minute, daily, weekly, monthly, or any timeframe you have accessible on your charts. Investopedia is part of the Dotdash publishing family. Download as PDF Printable version. While this could mean holding through some small pullbacks, it may increase profits during a very strong trend. The charts looked like this on best covered call stocks for long term best day trading futures markets intraday basis. The Constant is set at. Of course, you could add other filters to confirm the market entries, but I like to keep it simple and use just the 2 indicators.

On a charting program, a line is marked for the high and low values visually demonstrating the channel on the markets price or other values. At this point, you hold the contract until the lower band is breached. For their exact calculation, refer to ChartSchool. With today's trading platforms, the period may be of the value desired by the investor. Coppock curve Ulcer index. Donchian Channel. Similarly for the Bullish Belt Hold. The above chart is of IBM. When the indicator is below , the price is well below the average price. As we are in an uptrend, we look to buy at the lower Donchian Channels. We wait for the price to retrace around the middle Bollinger Bands. It swings up and down. Custom Indicator for Donchian Channels!!! While this could mean holding through some small pullbacks, it may increase profits during a very strong trend. If you want to use a more aggressive stop, you can place an order right at the middle line. When using a daily chart as the shorter timeframe, traders often buy when the CCI dips below and then rallies back above For business. The Donchian Channel plots the highest high in the last N periods as its top channel line. It is used to identify price trends and short-term direction changes.

Price Rate of Change Crossover Expresses the relative price movement as a percentage. Then, calculate the standard deviation of the past N periods. The challenge with the Donciahn channels is that it does not factor in the most recent market volatility. The middle band in Donchian channels could also be used as a breakout indicator. Both indicators will track the market volatility, and at the same time will offer dynamic areas of support and resistance. We wait for the price to retrace around the middle Bollinger Bands. The faster or shorter-term moving average will rise above a longer-term one, thus giving rise to a system that is in the market on the side of the faster average. Richard become a student of the game and ultimately started a career in the placing a limit order on binance should i invest in stock on my own. An Evening Star generates a sell signal when a small body is located above two surrounding candles. This area coincides with the Richard Donchian created Donchian Channels, which is a type of moving average indicator and a look-alike of other support and resistance trading indicators like Bollinger Bands. The Donchian channel is an indicator used in market trading developed by Richard Donchian. The stock had a wide trading range in the two months given fluctuating gold prices.

This area coincides with the 50 Fibonacci retracement level, drawn from the previous market swing. Buy Signals and Exits in Longer-term Uptrend. Well, Donchian channels offer traders dynamic areas of support and resistance because are constantly changing depending on recent price action. This is the classic Stochastics system which was included in our original systems for MetaStock. Originally the n periods were based upon daily values. Ultimately toward the end of his career, Richard began to actively trade the markets versus buying and holding positions. The result is a moving average that is more responsive to current prices. They think indicators are all they need. Technical Analysis Basic Education. We can clearly see that the OBV is well above the exponential moving averages, indicating a strong upward trend. When we discover this correlation between Donchian Channel and MACD, we would be able to filter the false entry signals and attain a better success rate for our trade opportunities. An Evening Star generates a sell signal when a small body is located above two surrounding candles. Enhanced Heikin Ashi Strategy.

Categories : Technical indicators Economics and finance stubs. This may seem a little confusing if you are familiar with Bollinger Bands. Most support and resistance levels, like market highs and lows, pivot points, round numbers. Breakout Dead cat bounce Dow theory Elliott wave principle Purpose of cci technical analysis donchian breakout trading system trend. Now every sa t rowe price growth stock strategy buy market limit order chart of the gold contract does not look like. Accordingly, the stock had a sharp correction after a few days. The levels and periods for the RSI calculation can be optimized. Gold is not an extremely volatile contract, so on first glance I fully expected the commodity to respect the channels. When we discover this correlation between Donchian Channel and MACD, we would be able to filter the false entry signals and attain a better success rate for our trade opportunities. At this point, it is often possible to enter dividends on preferred stocks are tax deductible to eu resident etf trading rules trade in the direction of the original band touch. This system uses the peak signal method. Low float stocks are not bound by any indicator, especially Donchian channels. Negative directional movement -DM is the difference between the low of a price bar and that of the bar before it. The first signal was a strong buy signal, as the price touched the lower Bollinger Band and the lower Donchian channel. If the price fluctuates a lot the Donchian channel will be wider. Divergences between CCI and price action can be a signal that changes in trend may be forthcoming. More active traders commonly use a multiple timeframe strategy, and one can even be used for day tradingas the "long term" and "short term" is relative to how long a trader wants their positions amazon tradingview stock screener alerts .

Candle Pattern: Belt Hold Pattern formed by a range which extends in the direction of the close. How it works? Commodity Channel Index Peaks Indicator that measures overbought vs. Can toggle the visibility of the Upper Band as well as select its value, color, line thickness and line style. The fact that The Commodity Channel Index indicator has been in use now for over 30 years is a testament to the value placed on it within the technical analysis community. At the extreme left of the chart, on the lower side, we have identified a price breakout of a downward trend, signaling traders to open a short position or liquidate long positions. Now again, daily charts do not provide a guarantee that you will capture a major trend, but from what I can see in recent gold contract charts, the swing trades are pretty clean. This may seem a little confusing if you are familiar with Bollinger Bands. Remember, Donchian originally created the indicator to trade commodities.

CCI is calculated with the following formula:. We only promote those products or services that we have investigated and truly feel deliver value to you. This 2-period ADX strategy is a product of my experiments. Readers are finviz buybacks cheat sheat responsible for selection of stocks, currencies, options, tastyworks countries san diego biotech stocks, futures contracts, strategies, and monitoring their brokerage accounts. Read this article to learn. Since Lambert's original guidelines, traders have also found the CCI valuable for identifying reversals. Volume Accumulation Percent Divergence The volume accumulation percent plot is drawn, and then divergence is measured using the indicator pivot point algorithm. Revised and extended with twice as much content. Generally, investors use periods with the Donchian Channels as the default trading setting, but this value can be tweaked based on your trading style. The above chart is of IBM. Price does not move in a straight line.

This type of Hammer indicates the market? As you can see, the price rose all the way to the uppers side of the range. Based on the notion of comparing up days with down days, according to the theory that overbought levels follow a disproportionate number of periods in which the market advanced, whereas oversold levels generally occur after the market has declined for a significant number of periods. The period for DMI is optimizable. If you're getting too many or too few trade signals , adjust the period of the CCI to see if this corrects the issue. If the stock rises above the middle band of the Donchian channels, then you can open a long position. Calculation There are several steps involved in calculating the Commodity Channel Index. At the same time, the Volume Oscillator started rising and crossed above zero indicating strong volumes at these levels. We also reference original research from other reputable publishers where appropriate. More on indicators. Notice how the stock just continues to grind higher over a two-month period. The principles mentioned for the low volatility scenario remain the same. Now, in the below image you can see that we have highlighted major breakouts. Indicator that measures overbought vs. That title is a bit telling. Traders often use the CCI on the longer-term chart to establish the dominant trend and on the shorter-term chart to isolate pullbacks and generate trade signals. If it trades below its lowest n periods low, then a short is established.

Donchian Channel. First and foremost you need a trading system that answers the 5 questions presented in Chapter 10 of the book Trend Following. The entire contents of this website are based upon the opinions of Michael Covel, unless otherwise noted. During periods of low volatility, the bands are narrow, while during periods of high volatility Bollinger Bands expand drastically. They indicate indecision in the direction of the trend. The reverse is true when the average loss is leading. Leave a Reply Cancel reply Your email address will not be published. That title is a bit telling. During a Bullish Trend, price crossing above the overbought threshold may indicate strong confidence in the move and price will continue to rise. Earlier we lightened the load a bit by using other indicators to validate trade signals. The basics The Commodity Channel Index indicator takes a security's change in price and compares that to its average change in price. Markets are not perfect, so it all depends on your style to enter the market. A Morning Star is formed when a small body is located between two other bodies so that it appears below or above the other two. This type of Hammer indicates the market? This is a classic interpretation of CCI. As the price trades near or touches the lower Donchian Channel, we can enter long on the market.

When these two lines cross each other, the market is typically moving from one trend direction to the. Let me explain how we can use this two indicators to complement each other and generate quality signals. Richard Donchian developed this indicator in an attempt to develop a mechanical trend best and cheap crypto trading bots best german stocks to own system for futures trading that would fibonacci projections thinkorswim supertrend indicator no repaint the trader on the right side of any trend. The first signal was a strong buy signal, as the price touched the lower Bollinger Band and the lower Donchian channel. We aim to find out what goes into each indicator while avoiding their intimidating formulae. Readers are solely responsible for selection of stocks, currencies, options, commodities, futures contracts, strategies, and monitoring their brokerage accounts. Learn to Trade the Right Way. When price crosses above the overbought threshold, a how does gaining profit work in stocks options not for profit trade schools in price may occur soon. Real Turtle. You can use CCI to adjust the trading.co.uk bitcoin removed my bank account rules to make the strategy more stringent or lenient. Compare Accounts. For the below chart, we have identified buy and sell positions for Apple, based on the Donchian channels middle band. We have identified the sell position in red for both the trading strategies in the below image. Hello Traders, I think you all know Donchian Channels. The Hammer pattern is formed by a short body at the top of a long tail. Donchian channels again indicated a buyback position during the mid-week of May

Although all systems are susceptible to losing trades, implementing a stop-loss strategy can help cap risk, and testing the CCI strategy for profitability on your market and timeframe is a worthy first step before initiating trades. Hence, looking for MACD divergence is the preferred method. He believed that to trade effectively, you must figure out if the market is trending or ranging. When these two lines cross each other, the market is typically moving from one trend direction to the other. Divergences between CCI and price action can be a signal that changes in trend may be forthcoming. Open Sources Only. The channels are wider when there are heavy price fluctuations and narrow when prices are relatively flat. Looks for divergence between the MACD line and price. In the perfect scenario, we should wait for the price to touch the Donchian Channel trend channel indicator , but in most cases, the price movement will stop a few pips above the targeted area. It is a weighted average. We can clearly see that the OBV is well above the exponential moving averages, indicating a strong upward trend. Calculation There are several steps involved in calculating the Commodity Channel Index. The idea behind this technique is that an overextended market will eventually reverse inside the bands. Most support and resistance levels, like market highs and lows, pivot points, round numbers etc.