Contents
CCI Forex indicator is one of the most popular indicators in Forex trading. CCI represents the combination of the words Consumer Confidence Index. The consumer confidence index is an economic term, which is widely used in Forex trading, as well. It supports traders to get the people’s sentiments and predict the following processes, which will be taken in the FX market.
The above-mentioned index is administered by the Conference Board. This is the way to measure people’s sentiments, whether they have optimistic or pessimistic attitudes towards financial situations. As long as economic reports tell a lot about the country’s economic condition and future development, CCI Forex can be the thing, that shows an approximate picture of the processes they may take in the marketplace. So, it’s quite profitable to use CCI for trading Forex. In this guide, you’ll get further information about CCi, how it works, what are the main things to know about it and whether it’s possible or not to have a CCI strategy in Forex trading, and what are the advantages to use it.
Consumer Confidence Index Explained in Layman’s Terms
Consumer Confidence Index, as already mentioned, is produced by the Conference Board. It measures the degree of consumer optimism related to the state of the economy. While indicators, such as GDP, CPI, and others tell us what has taken place in the economy, the CCI is one of a few economic indicators, that actually attempts to assess how consumers are feeling. So, understanding the consumer confidence index has a crucial role in the economy, its future development, and the decisions investors are making.
What’s more, it’s possible to predict consumer optimism based on the traditional economic indicators such as the unemployment rate, however, a decrease in the unemployment rate doesn’t always translate to improved consumer sentiments. So, instead of making assumptions based on what has already happened in the economy, it just makes more sense to ask consumers how they are feeling at this moment, instead. The widely held belief is that if consumers feel better about their current and prospects, they’ll probably spend more money. And since consumer spending makes up a large majority of the gross domestic product, economists, investors, and businesses are extremely interested in understanding how consumers are feeling.
The index of consumer confidence is derived from a monthly survey, which attempts to measure consumer feelings towards current conditions as well as future expectations of the economy. A total of 5 000 households are asked to indicate their general outlook in five areas each month. These areas include the conditions of current businesses, business conditions for the next six months, employment conditions in a current time, employment conditions for the next six months, and the total family income for the next six months. Respondents have to choose the answer, whether their attitude towards the above-mentioned areas is positive, negative, or just neutral. And this is designed to reflect the level of optimism in each of these five areas.
For understanding the importance of CCI in trading, you’ll need a CCI trading guide, that shows how the CCI works in Forex trading.
How CCI Works in Forex?
As already mentioned, CCI is one of the main indicators, which shows the readiness of the spending money. Even though that CCI isn’t showing directly the amount of money people are going to spend, depending on the information you can analyze the situation and go to the conclusion.
So, here’s the question: how can you use CCI in Forex trading? One of the main things to consider is that CCI shows the consumers’ sentiments. As long as the CCI rate is lower, it may be an important sign of declining the national currency value. This happens for economic reasons. As long as people start to spend less, the economic environment changes negatively. The demand for the national currency decreases and so the value of a certain currency goes down as well.
CCI trading system means a lot for being a successful trader in the Forex. Consumer Confidence Index allows traders to predict future changes and what processes are going to happen. Depending on the information they can get rational decisions, place large trades and get bountiful profits through Forex trading.
As already mentioned, GDP and that kind of indexes show the processes that already happened and in most cases, they aren’t much use for traders, while CCI can provide you with the information of the remaining processes and conditions and helps you to understand whether it worth it to trade with certain currency pairs or not.
To make it more clear and make the Forex CCI indicator explained, let’s take a simple example. Imagine, that in a certain state the inflation rate is fixed and is 1.5%, the unemployment rate is unchangeable as well, and the survey shows, that the CCI has risen positively, so people’s attitude towards the financial processes and businesses is more positive. This indicates that in the near future people are most likely to spend more money on services. As long as the spent money rises, either does the economy and the national currency. So, for this reason, if you are a trader, you’ll be more confident to deposit funds on your account and start trading with the currencies.
How to Trade With the CCI Forex Indicator?
Depending on the above-written information, you see that the Consumer Confidence Index has a crucial effect on the economy and the future decision, that are made by those people who are spending money. Forex CCI indicator download is possible. Traders can take into account all the information they can get through the aforementioned index.
What’s more, as already mentioned, CCI defines the readiness of the spending money, so traders can adopt the CCI indicator while Forex trading and consider the changes that may happen in the future. Even though, that the Central Banks don’t think that CCI can be taken too much seriously because it shows the results of the short time period and can not be too accurate to define the monetary policy, they are still taking into account all the results that are shown by the Consumer Confidence Index.
Through the above-mentioned indicator’s data traders can generate a CCI Forex trading strategy. To make it easy to understand, let’s take an example. For instance, imagine that you are a trader and you see the data of the CCI, which is published every end of the month. Through the information you can get from that you can define how is the national currency value going to change. Through the changes, you can decide whether to go long or short. If the results show that people’s attitudes are changed positively to spend their money, this means, that the certain currency value is going to get strong. What’s more, you can get information from another country’s CCI and compare them to each other. After seeing that and depending on the analysis you can define Forex CCI trading strategy and you can decide whether it worth it to trade through direct quotations or not. Direct and indirect quotations are some of the famous terms, that are used in Forex trading. The quotation is direct when you are trading with currency pairs, where one of them is your national currency, while the indirect quotation represents the opposite process and means that you’re trading with the currency pairs, where all of the currencies differ from your domestic currencies.
So, the above-given information shows, that traders can get profit from the CCI index, don’t waste their time waiting for the publishing the different indicator rates, such as GDP, inflation rate, unemployment rate, and so on, and follow CCI Forex strategy.
It also should be said, that the data which is shown by the CCI is sometimes volatile. So why does it happen, what are the reasons behind it? You’ll get further information about that in the following paragraph.
Why is CCI Highly Volatile?
As already mentioned, Consumer Confidence Index is high volatile. There are several reasons why the CCI is unstable and shows different results month by month.
To be convinced that the volatility is typical for CCI, let’s take a real example of the USA. Depending on the information of the US CCI by the end of the year, the CCI index for 1995 was near to 100 level. After that year it had a growing tendency till 1997, where the index’s level was almost 140. In 1998 it changed and the index level became more than the previous levels, it went beyond the level of 140. This was the maximum rate from 1995 to 2019 years. After that, there was a decreasing tendency and by 2002 years CCI went down to 80, then it started going up and for 2006 the eleven of CCI index was defined as 115. In 2008, when the global economic crisis took place the level of the CCI index went below 40, which was the lowest rate during 1995-2019 years. After that, the rate started fluctuating, and the highest level from 2008 to 2019 was in 2018, which was defines as 125. In 2019 it decreased a little bit but it was still higher than 120.
So, as you can see from the example, CCI changes a lot. However, there are, as already mentioned, some reasons, that affect changing its levels and rates.
One of the main reasons among others is the issues, that are highly linked to the economy and health. If most of the survey participants see that their health is deteriorating, they are most likely to spend more money on financial services. They lose confidence and readiness to take extra costs that are beyond the health issues. What’s more, if they see that the economic condition is going to worse, their confidence and positive attitude towards money spending are going to change negatively.
Another reason for CCI’s volatility is the radical processes that may happen in the markets, like the stock market. Stock market collapses have a crucial effect on the CCI and people’s readiness to spend their money. When the Stock Market collapses it has an effect on the currency values, as well.
The stagnation process and rising inflation rate are some of the main reasons why the CCI index can be changed. When the process of stagnation takes place it starts to have a negative effect on the economy and its growth. So, it goes without saying, that at that moment people aren’t positively inclined to spend their money and invest their funds in businesses or some finance-related fields.
What’s more, one additional reason beyond changing the CCI index is the latest published information on GDP and the unemployment rate. In most cases, people think, that the mentioned indexes are showing the current reality, while GDP shows the previous results of the processes, that took place. So, in some cases, the GDP rate can lead people to get wrong decisions, while CCI, which shows the current condition can be more useful to be relied on.
The Bottom Line
Depending on the information given above, it can be said that Consumer Confident Index has a significant meaning in Forex trading and furnishes people with useful data. Through CCI traders can get decisions, which may lead them to gain profits and earn money. While other economic indexes are showing the data, that reflects the previous processes, that took place in the past, CCI is the index, which is oriented to show you the remaining processes.
CCI as an index is the way to decide whether it worth it to trade with certain currency pairs or not. CCI, which shows the readiness of people to spend money, can be one of the dependable things, to consider while predicting the future. As long as the predictions and recent processes analysis means a lot in Forex trading, CCI may play a significant role to generate your own strategy. Having strategy, on the other hand, is the thing, that helps traders to reach success and earn money. Through the CCI index, people not only get information about possible changes in national currency values but also, can get information about how another country’s currency value may perform.