The Commodity Select Index CSI was intended by Welles Wilder to be used to select the best commodity to trade by weighing the volatility and trending characteristics of each futures market. According to Welles Wilder, the higher the Commodity Select Index, the best risk-reward setup.
The chart below of the 100 oz. Gold Futures contract illustrates the Commodity Select Index:
Four main inputs to the Commodity Select Index:
- Directional Movement
- Market Volatility
- Margin Requirements for the futures contract
- Commission Costs
The Commodity Select Index is usually calculated over 14-periods and includes the ADXR (see: ADX) in its calculation. The Commodity Select Index is yet another technical indicator created by Welles Wilder and chronicled in his classic and ever popular book, New Concepts in Technical Trading Systems.
How to Get Started Trading Commodities
If you are interested in trading using technical analysis, have a look at our reviews of these regulated brokers to learn which tools they offer:
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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 73.0%-89.0% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.