It shows cycles of concentration and diffuse in momentum.
----- HOW TO USE IT -----
Recommended to use with higher time frames (1-4h).
The "Extra Sensitive" option allows the bars to turn yellow at a value of 9 instead of 10.
1) Notice the cycles of narrowing and widening that the bands go through.
2) Narrowing bands indicate that the current movement, whether it is up or down, is about to enter a reversal area.
3) The proceeding widening indicates the start of a new cycle.
4) If the momentum direction did not change after passing narrow bands and entering widening bands, the direction will continue.
5) Bands that stay similar width for an extended length shows a continuation of the majority momentum direction.
A) Consider the yellow/red bars as bars of interest.
B) There are 3 phases: 1) Diffusing, 2) Dough, 3) Concentrating. The dough phase is called as such because it looks like the puffing up of dough in an oven.
C) Interest bars in the dough phase should be scrutinized in context of the previous concentrating/diffusing phase.
----- HOW THIS INDICATOR IS ORIGINAL; WHAT IT DOES AND HOW IT DOES IT -----
This indicator has an original, unique ability in anticipating an area near a reversal point before or while it occurs.
It does this by showing concentration/diffuse cycles of an oscillator made by the totalization of the 'CAA' (See: 'CAA').
Instead of using standard deviation math to show volatility around price (like how Bollinger Bands do), the 'CCAAT' (pronounced "Sea Cat") uses standard deviation math to show cycles of concentration and diffuse.
The cycles then make it easier to see where the momentum is going and if it is forming a reversal area/point.
----- VERSION -----
This indicator is not a replacement or different version of the 'CAA' indicator. It only uses the calculations of the 'CAA' but presents the results in a new fashion and in a new context.
The key point of the 'CCAAT' is to show the cycles of concentration and diffuse of the totalized value of 'CAA'.
This indicator is not useful in showing the specific color-levels derived from the underlying calculations, unlike the 'CAA' itself.
Another key difference of this indicator is that it ascribes a value to the different levels of the 'CAA'. This allows some numerical information to be analyzed.
The 'CAA' does not provide any numerical information of its underlying, mathematical calculations. It only presents color patterns.
Note that both the 'CAA' and the 'CCAAT' are not useful for presenting the information of the underlying, mathematical calculations. They both simply derive their levels from them.
They are not a replacement of or a different version of the KPAM, CCI, or RSI.
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