Staying with a trend, using commodity channel, mortgage rates

While we are on the subject of the possibility of a day trader holding overnight, let’s also see a way to stay with the trend allowing price volatility to dictate an exit point. To do that, we first have to review some material we presented in Trading The Ross Hook.

USING THE COMMODITY CHANNEL (CCI) INDEX TO STAY WITH THE TREND
We will see together how you can use the CCI study in a way that few have seen before. We’ll take it a step at a time. Pay close attention to what is being taught here. (The CCI study is available in most charting software packages.) The CCI measures the mean deviation of a bar’s Typical Price relative to a moving average of N bars’ Typical Price. Typical Price may be computed as the high plus the low plus the close, divided by three. This gives a close-weighted Typical Price. The CCI study is generally displayed with three horizontal lines:

+100, 0, and -100. However, CCI is theoretically, if not practically, infinitely expandable. There is one great advantage to the scale. It is increasingly difficult for CCI to make ever greater extremes in its readings. It takes increasingly more momentum to push the CCI plot increasingly further out on its scale. Experience has shown that a 30-bar CCI works best. We tested it all the way to 50 bars, and agreed that 30 bars was best. However, it may work better at other values in other markets, as we didn’t test every market available ....

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