Comments on: CCI - Making it better http://tuckerreport.com Technical Analysis and Daily Market Timing of Stock Indexes, Precious Metals, and more Mon, 12 May 2008 14:41:23 +0000 http://wordpress.org/?v=2.2.1 By: Doug Tucker http://tuckerreport.com/indicators/cci-improvement/#comment-511 Doug Tucker Sat, 05 Apr 2008 01:31:04 +0000 http://tuckerreport.com/indicators/cci-improvement/#comment-511 Webby, Regarding the smoothing, thee is no right or wrong. Some people prefer the raw or unsmoothed CCI if they are using it to draw trendlines, which I don't do. I find a slight smoothing helps to draw my attention to patterns such as the head and shoulders, which seems to pop out much more clearly using the smoothed version, as does the tests of the zero line. With a short parameter there is some lag but not much, so it seems to be a fair tradeoff to make the indicator more clear. I use the weighted average, but only a four period. I did notice that the formula you posted will double the scaling of the CCI, so the 100 line becomes the 200 line. I'd just use the tradestation function, or write it out manually. Regarding using the 21 period parameter, I do like to look at a longer term signal line and 21 period is good for that, but sometime I use a 16 period. I just use the tradestation exponential moving average function for that, and I plot it over the top of the smoother cci along with the histogram of the smoothed cci. I also plot the unsmoothed line, but fairly faint so it doesn't distract. But I find using a longer smoothing for the basic cci obscures the patterns too much. Webby,
Regarding the smoothing, thee is no right or wrong. Some people prefer the raw or unsmoothed CCI if they are using it to draw trendlines, which I don’t do. I find a slight smoothing helps to draw my attention to patterns such as the head and shoulders, which seems to pop out much more clearly using the smoothed version, as does the tests of the zero line. With a short parameter there is some lag but not much, so it seems to be a fair tradeoff to make the indicator more clear. I use the weighted average, but only a four period. I did notice that the formula you posted will double the scaling of the CCI, so the 100 line becomes the 200 line. I’d just use the tradestation function, or write it out manually. Regarding using the 21 period parameter, I do like to look at a longer term signal line and 21 period is good for that, but sometime I use a 16 period. I just use the tradestation exponential moving average function for that, and I plot it over the top of the smoother cci along with the histogram of the smoothed cci. I also plot the unsmoothed line, but fairly faint so it doesn’t distract. But I find using a longer smoothing for the basic cci obscures the patterns too much.

]]> By: Webby http://tuckerreport.com/indicators/cci-improvement/#comment-508 Webby Fri, 04 Apr 2008 07:36:03 +0000 http://tuckerreport.com/indicators/cci-improvement/#comment-508 Doug, I managed to get the Adaptive CCI working from the Ehlers book, but in order to smooth it out I am using the following statement : CCI_Smoothed = 2 * (WAverage(CCI_Adaptive, WMALength) - .5); wherein, "CCI_Adaptive" is the raw CCI adaptive value returned from Ehlers formula in the book, and "CCI_Smoothed" is the smoothed out version of the same, which I then plot. Is this the correct way to go about smoothing the adaptive CCI ? Also, for the smoothing moving average I am using an input variable "WMAlength", that allows me to see the effects of varying that moving average. I am currently using a value of 21 for the moving average as that gives me patterns that I can easily recognize and work with for trading. Using smaller lengths (such as 5, 6 etc) creates a lot of whipsawing to and fro over the zero line and makes it difficult to for me to discern the real longer trend. Am doing this correctly ? and do you have any suggestions for the length of the smoothing moving average ? Your ideas on this would be much appreciated. Doug, I managed to get the Adaptive CCI working from the Ehlers book, but in order to smooth it out I am using the following statement :

CCI_Smoothed = 2 * (WAverage(CCI_Adaptive, WMALength) - .5);

wherein, “CCI_Adaptive” is the raw CCI adaptive value returned from Ehlers formula in the book, and “CCI_Smoothed” is the smoothed out version of the same, which I then plot.

Is this the correct way to go about smoothing the adaptive CCI ? Also, for the smoothing moving average I am using an input variable “WMAlength”, that allows me to see the effects of varying that moving average.

I am currently using a value of 21 for the moving average as that gives me patterns that I can easily recognize and work with for trading. Using smaller lengths (such as 5, 6 etc) creates a lot of whipsawing to and fro over the zero line and makes it difficult to for me to discern the real longer trend.

Am doing this correctly ? and do you have any suggestions for the length of the smoothing moving average ? Your ideas on this would be much appreciated.

]]> By: Doug Tucker http://tuckerreport.com/indicators/cci-improvement/#comment-33 Doug Tucker Wed, 05 Sep 2007 17:46:19 +0000 http://tuckerreport.com/indicators/cci-improvement/#comment-33 Tony, I did have a problem with the alpha parameter adjustment, and for a long time used fixed CCI values of 21, 34, and 55. In time I became for comfortable using the Ehlers formula without the need for the fixed periods, realizing that the Ehlers formula will never be exact but will get me in the ballpark of the most useful cycle. And I do find on the intra-day tick charts the most common cycles seem to hover around 35 to 40 periods with brief excursions beyond 50 or so during trends, and the only time the cycle shortens to 14 is in chop. The daily charts are much more consistent at between 20 and 30, as you suggest. Doug Tony, I did have a problem with the alpha parameter adjustment, and for a long time used fixed CCI values of 21, 34, and 55. In time I became for comfortable using the Ehlers formula without the need for the fixed periods, realizing that the Ehlers formula will never be exact but will get me in the ballpark of the most useful cycle. And I do find on the intra-day tick charts the most common cycles seem to hover around 35 to 40 periods with brief excursions beyond 50 or so during trends, and the only time the cycle shortens to 14 is in chop. The daily charts are much more consistent at between 20 and 30, as you suggest. Doug

]]> By: Tony http://tuckerreport.com/indicators/cci-improvement/#comment-29 Tony Sat, 01 Sep 2007 14:30:36 +0000 http://tuckerreport.com/indicators/cci-improvement/#comment-29 Hi Doug - having experimented a with the variable cycle period on the CCI as explained in your article I find the results interesting to say the least. Having spent some time with the WCCI outfit, (an having heard the resistance NOW mantra on numerous occasions) it is really interesting to it for what it really is. Even more interesting is the fact that the CCI formula as indicated on the WCCI site has a hard coded 20 period lookback scheme! Having coded the Ehlers cycle determining period the following : 1. The results of very small adjustments in the alpha parameter appear to have a huge effect on the cycle period determined. I find this fairly disconcerting, as it becomes hard to find a consistent relationship. 2. The cycle period appears to be the exact inverse of what the WCCI club promotes (14p 5min or less, 20 for anything over 5 mins). Generally it would appear that periods averaging around 50 appear fairly consistently on interday charts, while daily, weekly and monthly charts float around 22-30 periods (barring real chop). Is this consistent with your experience? 3. I must say - the effect of the longer period is remarkable. Your effort has sparked much food for thought. Thank you ! Regards Tony Hi Doug - having experimented a with the variable cycle period on the CCI as explained in your article I find the results interesting to say the least. Having spent some time with the WCCI outfit, (an having heard the resistance NOW mantra on numerous occasions) it is really interesting to it for what it really is. Even more interesting is the fact that the CCI formula as indicated on the WCCI site has a hard coded 20 period lookback scheme! Having coded the Ehlers cycle determining period the following :
1. The results of very small adjustments in the alpha parameter appear to have a huge effect on the cycle period determined. I find this fairly disconcerting, as it becomes hard to find a consistent relationship.
2. The cycle period appears to be the exact inverse of what the WCCI club promotes (14p 5min or less, 20 for anything over 5 mins). Generally it would appear that periods averaging around 50 appear fairly consistently on interday charts, while daily, weekly and monthly charts float around 22-30 periods (barring real chop). Is this consistent with your experience?
3. I must say - the effect of the longer period is remarkable.

Your effort has sparked much food for thought. Thank you !

Regards

Tony

]]> By: John Sykes http://tuckerreport.com/indicators/cci-improvement/#comment-22 John Sykes Wed, 22 Aug 2007 18:53:23 +0000 http://tuckerreport.com/indicators/cci-improvement/#comment-22 Hi Doug, Again, thanks for all your input on a variable CCI. I hace had a .efs developed for eSignal of a dynamic (variable) CCI. There are still a couple of bugs but they will soon be gone. If anyone wants this .efs, they can Email me at john@sykesusa.com, and I'll let them know where to go. It will probably not be free but I can say that I will get little if anything out of it. I was also a frustrated CCIer who soon realized that the CCI had to be used with a longer period. It had not occurred to me that the period should be variable. You changed that. I think that anyone who puts a dynamic CCI on his charts will immediately see the difference. But, again, thanks. I'll post more as we go along. John Hi Doug,

Again, thanks for all your input on a variable CCI. I hace had a .efs developed for eSignal of a dynamic (variable) CCI. There are still a couple of bugs but they will soon be gone. If anyone wants this .efs, they can Email me at john@sykesusa.com, and I’ll let them know where to go. It will probably not be free but I can say that I will get little if anything out of it.

I was also a frustrated CCIer who soon realized that the CCI had to be used with a longer period. It had not occurred to me that the period should be variable. You changed that. I think that anyone who puts a dynamic CCI on his charts will immediately see the difference.

But, again, thanks. I’ll post more as we go along.

John

]]> By: Mike Winfrey http://tuckerreport.com/indicators/cci-improvement/#comment-20 Mike Winfrey Sat, 18 Aug 2007 17:59:09 +0000 http://tuckerreport.com/indicators/cci-improvement/#comment-20 Thanks Doug...I understand your point about the cycle. I can certainly confirm what you're saying based on observation. The only problem for me is the divergence and as the CCI is designed that will always occur. I also see the divergence in every indicator I've seen except when looking at price directly. How obvious is that? Kidding. I have pondered the issue of divergence for quite some time and actually thought I had found a way to minimize it's occurence with this adaptive cci and it appears to be the best I've seen so far. So, NOT BAD I guess is my comment about the adaptive CCI. Pondering this issue for sometime and discussing it with other, my thought has been "if divergence is such an issue for you, why don't you just trade off price." A very good friend that you know as well asked me that very question the other night. That finally caused me to think about the problem a bit differently. As a result, I thought how can I accurately represent price without having to look directly at price. The answer came to me to use EMA with a period of 1. That IS price. I put that up and liked it because there was no divergence. Go figure...Kinda liked that. But that wasn't enough. It was kinda noisy so I used h+l+c/3 to calculate the EMA(10). Smoothed it out considerably. Funny that it has a CCI look which you would expect except there is no zero line. Well I like the look of the CCI so with the help of a friend, we put some bars under the EMA that we use for a purpose I won't detail here. I also added 4 other EMAs, EMA(2). EMA(3), EMA(4), and EMA(5). Now that gives me some indication of where entries might be. Then as another experiment based on this adaptive CCI study, I added a smoothing component to see what that did. I like what I saw but it's use will be delayed for a bit while I explore the base EMA chart. I also intend to add the adaptive code in a separate EMA to explore it's use as a signal line. All I can say now is studying this adaptive CCI has really opened a new world to me in understanding and possibilities. We are in the process now of backtesting some entry rules. Thanks, Mike Thanks Doug…I understand your point about the cycle. I can certainly confirm what you’re saying based on observation. The only problem for me is the divergence and as the CCI is designed that will always occur. I also see the divergence in every indicator I’ve seen except when looking at price directly. How obvious is that? Kidding. I have pondered the issue of divergence for quite some time and actually thought I had found a way to minimize it’s occurence with this adaptive cci and it appears to be the best I’ve seen so far. So, NOT BAD I guess is my comment about the adaptive CCI. Pondering this issue for sometime and discussing it with other, my thought has been “if divergence is such an issue for you, why don’t you just trade off price.” A very good friend that you know as well asked me that very question the other night. That finally caused me to think about the problem a bit differently. As a result, I thought how can I accurately represent price without having to look directly at price. The answer came to me to use EMA with a period of 1. That IS price. I put that up and liked it because there was no divergence. Go figure…Kinda liked that. But that wasn’t enough. It was kinda noisy so I used h+l+c/3 to calculate the EMA(10). Smoothed it out considerably. Funny that it has a CCI look which you would expect except there is no zero line. Well I like the look of the CCI so with the help of a friend, we put some bars under the EMA that we use for a purpose I won’t detail here. I also added 4 other EMAs, EMA(2). EMA(3), EMA(4), and EMA(5). Now that gives me some indication of where entries might be. Then as another experiment based on this adaptive CCI study, I added a smoothing component to see what that did. I like what I saw but it’s use will be delayed for a bit while I explore the base EMA chart. I also intend to add the adaptive code in a separate EMA to explore it’s use as a signal line. All I can say now is studying this adaptive CCI has really opened a new world to me in understanding and possibilities. We are in the process now of backtesting some entry rules.

Thanks,
Mike

]]> By: Doug Tucker http://tuckerreport.com/indicators/cci-improvement/#comment-19 Doug Tucker Thu, 16 Aug 2007 20:45:04 +0000 http://tuckerreport.com/indicators/cci-improvement/#comment-19 Mike, I set my limits to 8 and 60. It seems anything beyond 60 isn't helpful. If you think about what the code is trying to do, it is just eliminating the cyclic content as it is detecting trend and slowly incrementing the cycle length upward as long prices lack cycle tendency. It seems that no matter what time frame you are using there will be some cyclic tendency before 60 bars are reached. Even if not, the CCI will just bump up somewhere beyond the 100 level and stay there and the patterns won't be that much different if it the cycle stays at 60 or goes to 80 or 100. Also when the cycle comes back into play it will take longer to display the new cycles, especially if a couple of moving averages are used prior to the final cycle measure. This isn't perfect. The best that it can do is get in the ballpark of the developing cycle. Not sure why the length doesn't change when you change those limits. It does on my tradestation code. Also, I have tradestation scale in the sub-graph to display the entire range that the CCI travels on the current chart, rather than limit it in any way. That's a good observation on the lack of divergences as the cycle length extends. When clear divergences do present themselves they are often more reliable than they are with the shorter parameter CCI. And thanks for sharing your posts. Doug Mike, I set my limits to 8 and 60. It seems anything beyond 60 isn’t helpful. If you think about what the code is trying to do, it is just eliminating the cyclic content as it is detecting trend and slowly incrementing the cycle length upward as long prices lack cycle tendency. It seems that no matter what time frame you are using there will be some cyclic tendency before 60 bars are reached. Even if not, the CCI will just bump up somewhere beyond the 100 level and stay there and the patterns won’t be that much different if it the cycle stays at 60 or goes to 80 or 100. Also when the cycle comes back into play it will take longer to display the new cycles, especially if a couple of moving averages are used prior to the final cycle measure. This isn’t perfect. The best that it can do is get in the ballpark of the developing cycle. Not sure why the length doesn’t change when you change those limits. It does on my tradestation code. Also, I have tradestation scale in the sub-graph to display the entire range that the CCI travels on the current chart, rather than limit it in any way. That’s a good observation on the lack of divergences as the cycle length extends. When clear divergences do present themselves they are often more reliable than they are with the shorter parameter CCI. And thanks for sharing your posts.
Doug

]]> By: Mike Winfrey http://tuckerreport.com/indicators/cci-improvement/#comment-18 Mike Winfrey Thu, 16 Aug 2007 15:16:03 +0000 http://tuckerreport.com/indicators/cci-improvement/#comment-18 By the way, I should mention that in order for my approach to be beneficial in any way, the charting package must allow dynamic scaling of the cci panel. Otherwise, you could go to extremes and sit there for any number of bars. I have modified the adaptive code to allow a multiplication of the calculated period. So, as of this writing, I am using a multiplication factor of 10. The current calculated period is 26 so my effect period is 10 x 26 =260. Mike By the way, I should mention that in order for my approach to be beneficial in any way, the charting package must allow dynamic scaling of the cci panel. Otherwise, you could go to extremes and sit there for any number of bars.
I have modified the adaptive code to allow a multiplication of the calculated period. So, as of this writing, I am using a multiplication factor of 10. The current calculated period is 26 so my effect period is 10 x 26 =260.
Mike

]]> By: Mike Winfrey http://tuckerreport.com/indicators/cci-improvement/#comment-17 Mike Winfrey Thu, 16 Aug 2007 14:50:13 +0000 http://tuckerreport.com/indicators/cci-improvement/#comment-17 I've been working with the adaptive cci for a few weeks now but first started my study of the cci without the adaptive code. I plotted several CCIs of different periods. So in other words, I had a cci14, cci34, cci50, and cci100 just as an example. I noticed that the different periods showed the same basic patterns but noticed one thing that I found to be significant. There are a number of times during a day where divergence appears. What I noticed is that the longer the period the fewer occurences of divergence. That was very desirable to me. Divergence can cause problems for the success of the patterns, imo. The longer period didn't show the divergence and more closely represented what price was doing. This also presented more of an opportunity to enter with the trend. You'll have to check this out for yourself. Also, the longer periods cross the zero line less frequently which more closely represents the REAL trend instead of an artificial CCI trend. I find that crossing the zero line really is an attempt to change the trend in price. There are certainly exceptions to all these observations but fewer exceptions than using a straight cci14 which is very noisy. Well now to my current state. I have the adaptive cci in operation and am using it. However, it isn't adaptive the way I was hoping. It somehow limits the min and max periods to 6 and 50. Those can be changed but the reality is that the rest of the algorithm seems to keep the period within those limits. I am really wanting the period to change to whatever the true cycle of the market is without those artificial boundaries. Haven't come up with a solution yet but am looking. Haven't conversed with John Ehlers yet but intend to. Well I guess that's my dissertation for now. Thanks Doug for allowing these comments. Mike I’ve been working with the adaptive cci for a few weeks now but first started my study of the cci without the adaptive code. I plotted several CCIs of different periods. So in other words, I had a cci14, cci34, cci50, and cci100 just as an example. I noticed that the different periods showed the same basic patterns but noticed one thing that I found to be significant. There are a number of times during a day where divergence appears. What I noticed is that the longer the period the fewer occurences of divergence. That was very desirable to me. Divergence can cause problems for the success of the patterns, imo. The longer period didn’t show the divergence and more closely represented what price was doing. This also presented more of an opportunity to enter with the trend. You’ll have to check this out for yourself. Also, the longer periods cross the zero line less frequently which more closely represents the REAL trend instead of an artificial CCI trend. I find that crossing the zero line really is an attempt to change the trend in price. There are certainly exceptions to all these observations but fewer exceptions than using a straight cci14 which is very noisy. Well now to my current state. I have the adaptive cci in operation and am using it. However, it isn’t adaptive the way I was hoping. It somehow limits the min and max periods to 6 and 50. Those can be changed but the reality is that the rest of the algorithm seems to keep the period within those limits. I am really wanting the period to change to whatever the true cycle of the market is without those artificial boundaries. Haven’t come up with a solution yet but am looking. Haven’t conversed with John Ehlers yet but intend to.

Well I guess that’s my dissertation for now.

Thanks Doug for allowing these comments.

Mike

]]> By: Doug Tucker http://tuckerreport.com/indicators/cci-improvement/#comment-13 Doug Tucker Thu, 16 Aug 2007 00:53:18 +0000 http://tuckerreport.com/indicators/cci-improvement/#comment-13 Frank, I can't post the code here as it is copyrighted by John Ehlers. I have references to both his books. His Rocket Science book has a good version of the adaptive parameter and it is already coded for TradeStation. His next book, Cybernetic Analysis has a different code, and he has it written out for both Tradestation and eSignal, but I don't recall he has the CCI written written out, but it is easy to put in. I'm sure there are places on the web that also have the code published if you search around. Check TradeStation forum. Thanks for the post, Doug Frank, I can’t post the code here as it is copyrighted by John Ehlers. I have references to both his books. His Rocket Science book has a good version of the adaptive parameter and it is already coded for TradeStation. His next book, Cybernetic Analysis has a different code, and he has it written out for both Tradestation and eSignal, but I don’t recall he has the CCI written written out, but it is easy to put in. I’m sure there are places on the web that also have the code published if you search around. Check TradeStation forum.
Thanks for the post,
Doug

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