Adaptive
Adaptive Commodity Channel Index
The CCI (Commodity Channel Index) is an oscillator created by Donald R. Lambert to identify cyclical changes in the commodity market. The basic hypothesis of the CCI is that commodities move cyclically, with the formation of highs and lows at periodic intervals. Practically this oscillator is also used on stocks and bonds and more generally on all markets that have strong cyclicality. The construction of the Commodity Channel Index starts from the calculation of the “Typical Price” and its “Simple Moving Average” at 20 periods. Lambert recommends using a third of the cycle length as the period for calculating the CCI, so if the cycle lasts 60 periods, a 20-period CCI will be used. The average deviation is then calculated and the CCI indicator is constructed as the ratio between the difference between the typical price and its moving average and the average deviation multiplied by a constant equal to 0.015. The constant 0.015 introduced by Lambert allows the oscillator to have values that are in the majority (70-80%) of cases between +100 and -100. The CCI is therefore used as a real oscillator, highlighting overbought situations when it is above +100 and oversold situations when it is below -100. Furthermore, the Commodity Channel Index provides divergence signals from prices and these are much stronger when they occur mostly in the excess positions of the indicator.
Adaptive Relative Strength Index
The Relative Strength Index, created by John Welles Wilder, is one of the most widely used technical analysis oscillators by traders, especially those dealing with futures. It is a momentum indicator, which however manages to overcome some problems present in the momentum of other oscillators that generate considerable complications in their interpretation, especially when sudden movements of the market occur causing a sudden reversal. It is therefore necessary, for a correct and more understandable analysis, to minimize such distortions. The Relative Strength Index, in addition to solving this problem, has a constant oscillation band, from 0 to 100, which allows a comparison of the values with some predetermined constant levels. By presenting a constant excursion band, from 0 to 100, it is possible to identify fixed zones in which the oscillator is in an extreme situation; they will therefore be considered overbought zones when the oscillator records values higher than 70, while we will be oversold if it shows values lower than 30. It should be noted, however, that the classic doctrine of technical analysis identified these extreme levels as 80 and 20, rather than 70 and 30. The signals generated by this oscillator are similar to those of many others. The median line of 50 should be considered as the watershed between a bullish and a bearish market. The intersection of the RSI line with this level can be considered a BUY or SELL signal. But much more important and interesting are, however, the bullish or bearish divergences that can be identified in extreme zones. These signals must be monitored very carefully because they can be classified as very worrying situations; the creator himself considers divergences to be the most indicative characteristic of this oscillator. However, it should be remembered that a strong market prematurely generates overbought or oversold signals and this can lead to hasty exits from a trend that is still potentially valid; in fact, overbought phases during a bull market can last a long time, like oversold phases during a bear market. Another way to identify market entry and exit signals thanks to this oscillator is through the use of the 30 and 70 lines, which delimit extreme situations. For example, in the case of a bear market that generates an oversold situation, with the oscillator therefore well below the 30 line, it could be interesting to take bullish positions once the value has returned above that level. This would be an entry with a reasonable margin of risk, but it could prove to be an excellent and timely entry in view of a new bullish movement.
Adaptive Williams %R
Williams %R is an indicator developed by the famous American trader Larry Williams, which oscillates between 0 and -100, practically on an inverted scale. Two extreme zones of the index are identified, but their reading occurs in a mirror manner to that of the stochastic itself. According to the author, the zones to monitor are -20 and -80. Values above -20 represent the overbought area, while values below -80 represent the oversold area. The buy signal is activated when the indicator, after falling into oversold (below -80), falls above this threshold. On the contrary, the sell signal will start when the indicator in the overbought zone (above -20) goes down and violates this threshold.