CCI, Williams %R and MFI

What it is

The Commodity Channel Index (Donald Lambert, 1980) measures how far the typical price is from its average: (typical price − its moving average) ÷ (0.015 × mean deviation). Readings above +100 or below −100 are unusual. Williams %R (Larry Williams) is the stochastic turned upside down: (highest high − close) ÷ (highest high − lowest low) × −100, with −20 and −80 as the overbought and oversold lines.

The Money Flow Index is a volume-weighted RSI: it uses typical price × volume, with 80 and 20 as the usual levels. On forex and CFDs, that volume is broker tick volume. Bill Williams' Awesome Oscillator is the 5-period minus the 34-period simple average of the bar midpoints, drawn as a histogram.

How to spot it

• Extreme readings and divergences, as with RSI.

How to use it

• Pick one oscillator and learn it well; they mostly say the same thing.
• Use extremes for entries with the trend, not against it.

Common mistakes

• Stacking several oscillators and calling it confluence; they're built from the same prices.
• Fading strong trends because an oscillator is 'overbought'.

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