It's a CCI sorta thing, where you enter as you move up through 0 and exit as you move down through it. Zero isn't the end of the story with CCI: When it's going down, it's often the beginning of the plunge to -100 or lower, and when it's going back up, 0 often signals a real rally, back to 100 and beyond. It works in many cases in the long term, believe it or not, but Wolfgang and others have been considering different exits. Fox example, you could exit when AvgPrice falls back through 100, if you're using the traditional CCI sort of AvgPrice with a scale basically from -100 to 100. You could enter when it comes back up through minus 100, too. I'll have to look at them all when I return from TAINJ and other journeys after that.
Try plotting the formula with the moves up and down through 0. Remarkably, it does catch some of the tops and bottoms. For example, have a look at Amati's breakout in the spring of '96. Zero was a nice signal for the beginning and the end. The eternal circle, ya know.
Of course, you don't get a buy and a sell signal at the same time: The system has you enter when AvgPrice is less than zero, then exit the next time it's less than zero. |
