The ( ) is an oscillator originally introduced by Donald Lambert in 1980.
Lambert's trading guidelines for the focused on movements above +100 and below −100 to generate buy and sell signals. Because about 70 to 80 percent of the values are between +100 and −100, a buy or sell signal will be in force only 20 to 30 percent of the time. When the moves above +100, a security is considered to be entering into a strong uptrend and a buy signal is given. The position should be closed when the moves back below +100. When the moves below −100, the security is considered to be in a strong downtrend and a sell signal is given. The position should be closed when the moves back above −100.
Since Lambert's original guidelines, traders have also found the valuable for identifying reversals. The is a versatile indicator capable of producing a wide array of buy and sell signals.
- CCI can be used to identify overbought and oversold levels. A security would be deemed oversold when the dips below −100 and overbought when it exceeds +100. From oversold levels, a buy signal might be given when the moves back above −100. From overbought levels, a sell signal might be given when the moved back below +100.
- As with most oscillators, divergences can also be applied to increase the robustness of signals. A positive divergence below −100 would increase the robustness of a signal based on a move back above −100. A negative divergence above +100 would increase the robustness of a signal based on a move back below +100.
- Trend line breaks can be used to generate signals. can be drawn connecting the peaks and troughs. From oversold levels, an advance above −100 and breakout could be considered . From overbought levels, a decline below +100 and a could be considered .
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Any help and suggestions will be appreciated.
Marcos Issler @ Isslerman
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