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2006issue C011-7

Building custom indicators from the Commodity Channel Index, a least squares moving average and a rule-based entry

A custom oscillator can be formed by subtracting a reference average from the close, then combining Commodity Channel Index and least squares moving average filters into a scored trigger. Those conditions are frozen as one rule-based entry so the construction can be prototyped and backtested as a full strategy rather than treated as a finished trading method.

  • A custom oscillator can be built by subtracting an 18-period average of the close from the close, then overlaying a short smoother and a zero line so a central-line cross is the same event as a price-versus-average cross.
  • Lookback length and the chosen price or volume series change an indicator's values without rewriting code, and a three-to-seven-period smoother lets crosses of the raw line versus the smoothed line be treated as candidate signals.
  • One scored trigger combines a 50-period Commodity Channel Index, a 14-period Commodity Channel Index, a 34-period exponential moving average and a 25-period least squares moving average, and the rule-based entry fires only when every listed buy or sell condition is met.
  • Structured programs split a header, a calculation module and plotting instructions so extra trigger conditions can be stacked by changing inputs or slightly extending the same code.
Entries in this reading3 entries
Least squares moving average3 readingsCurrent trackCommodity Channel Index40 readingsRule-based entry174 readings

Isolate a price-to-baseline residual

A custom oscillator can be built by subtracting a reference series, such as an 18-period average of the close, from a dependent series such as the close, then overlaying a short smoother and a zero line so a central-line cross is the same event as a price-versus-average cross.

Change inputs without rewriting the code

Input variables such as lookback length and which price or volume series is used change an indicator's values without rewriting code, and a three-to-seven-period smoother is commonly plotted over a noisy series so crosses of the raw line versus the smoothed line can be treated as candidate signals.

Normalize the Commodity Channel Index on a fixed scale

Commodity Channel Index constructions are presented as normalized oscillators on a fixed scale so common overbought and oversold thresholds can be compared across markets.

Combine the filters into buy and sell trigger bands

One trigger construction combines a 50-period Commodity Channel Index, a 14-period Commodity Channel Index, a 34-period exponential moving average, and a 25-period least squares moving average to set buy and sell trigger bands.

Freeze the listed conditions as one rule-based entry

The rule-based entry fires when Commodity Channel Index readings are above zero and the close has crossed above both moving averages, sending the indicator into a buy-trigger zone. The opposite conditions define the sell-trigger zone.

A reading of plus or minus 4 on that trigger is defined as the state in which every listed condition has been met, while lesser extremes are treated only as proximity to the user-defined opportunity, not as a completed signal.

Split the program into header, calculation and plot

Structured indicator programs are split into a header that binds inputs and variables, a calculation module that applies platform functions, and plotting instructions that choose what to display, so the same procedure can be reused when extra trigger conditions are added.

Prototype a full strategy from the custom indicators

The construction is offered as a way to prototype and backtest a full strategy from custom indicators rather than as a finished trading method. Extra conditions can be stacked by changing inputs or slightly extending the same code.

Trigger score with +3 / −3 entry bands

The step series is the four-condition trigger: +4 means both Commodity Channel Index filters and both average rules agree on a long, −4 is the short equivalent, and ±2 or 0 only show partial agreement. A trader watches the score leave the +3 or −3 band, not the wiggles in between. Scores were read from the step plot in the trigger pane, where the green band, yellow lines and red band mark +4, ±3 and −4. Bar numbers run left to right across that window because the figure has no time stamps.
The step series is the four-condition trigger: +4 means both Commodity Channel Index filters and both average rules agree on a long, −4 is the short equivalent, and ±2 or 0 only show partial agreement. A trader watches the score leave the +3 or −3 band, not the wiggles in between. Scores were read from the step plot in the trigger pane, where the green band, yellow lines and red band mark +4, ±3 and −4. Bar numbers run left to right across that window because the figure has no time stamps.

The demonstration freezes four ±1 switches: 50-period CCI above zero, 14-period CCI above zero, close above a 34-period exponential average, and close above a 25-period least-squares average. The sum can only be −4, −2, 0, +2 or +4. Plateau widths are approximate.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
28 of 39 in the Commodity Channel Index track
201212-21 pp.Next on Commodity Channel IndexConfirming breakouts and retracements with CCI, ADX, and averagesChart work is multidimensional, so a single indicator is not expected to supply a complete read of price behavior.
All readings on this track · 39 readings
  1. 1982Three gates on a 1982 pork-belly short
  2. 1982Scale-free Commodity Channel Index construction
  3. 1986Constructing a commodity channel index and a regression price channel
  4. 1987Constructing scaled OHLC matrices for study overlays
  5. 1987Constructing the commodity channel, average directional, and relative strength indexes on a shared cycle scale
  6. 1992Eleven-bar commodity channel index from typical price and mean deviation
  7. 1992Evaluating Commodity Channel Index breakout versus range rules
  8. 1992Evaluating breakout and CCI rules as complete mechanical procedures
  9. 1993Constructing stochastic, RSI and CCI inputs for forecasts
  10. 1993Nested centered channels with a commodity channel index confirmation gate
  11. 1993Listed-option timing as three separable clocks
  12. 1994Constructing an eleven-period commodity channel index
  13. 1994Confirming Elliott wave turns with channels and the commodity channel index
  14. 1995Commodity Channel Index band rules lag zero-line timing
  15. 1995Building the commodity channel index from typical price
  16. 1995Staged reversal rules with commodity channel index and average channels
  17. 1995Commodity channel index construction from typical price to a smoothed zero line
  18. 2001Reader tests for unfinished lookback oscillators
  19. 2002Constructing the commodity channel index from typical price
  20. 2003Breadth-filtered commodity channel index entry and exit rules
  21. 2003Constructing the Commodity Channel Index from typical price and scaled deviation
  22. 2003A shallow, poorly participated advance is an unconfirmed trend
  23. 2003CCI and RSI parameter defaults as scaling conventions
  24. 2003A cost and capital audit of a Commodity Channel Index trade engine
  25. 2003Commodity channel index peak divergence as an exit after twin patterns
  26. 2004Constructing the Commodity Channel Index from typical price
  27. 2004Constructing the Commodity Channel Index from typical price and mean deviation
  28. 2006Building custom indicators from the Commodity Channel Index, a least squares moving average and a rule-based entry
  29. 2012Confirming breakouts and retracements with CCI, ADX, and averages
  30. 2012Stacking oscillator lookbacks into a heatmap mosaic
  31. 2013Constructing a consensus and volatility-normalized value oscillator
  32. 2013Walk-forward system evaluation with a commodity channel index and chandelier exits
  33. 2014Dual detrended oscillators and dual Bollinger Band channels
  34. 2014RSI, CCI, and moving-average trend-filter construction
  35. 2014Dual RSI, a moving average, and CCI as a confirmation stack
  36. 2017Constructing dual-average cross and channel-index filters
  37. 2018Treat CAM as a classification layer before confirmation becomes an entry
  38. 2018Four-state slope labels gated by a moving average and a commodity channel index
  39. 2018Deviation-Scaled Moving Average construction from a two-bar difference
By fieldIndicators and filters682 readingsBy year200683 readings
All 40 readings tagged Commodity Channel Index
Also on Commodity Channel Index5 readings
1995Evaluating a least-squares end-point moving average on a known test seriesLeast squares moving average2014Walk-forward velocity filters on noisy intraday trendsLeast squares moving average1992Evaluating Commodity Channel Index breakout versus range rules1995Commodity Channel Index band rules lag zero-line timing1995Staged reversal rules with commodity channel index and average channels