Oscillator Indicator: Commodity Selection Index (CSI)
The Commodity Selection Index (CSI) is a momentum indicator developed by J. Welles Wilder, Jr., and published in his book New Concepts in Technical Trading Systems in 1978. CSI takes the strength and volatility of trends to determine momentum. It was developed specifically for short-term commodity futures contracts that are likely to have large price movements and potentially huge ROI.
This is done using the Directional Movement Index (DMI) (or ADXR component of the DMI, to be more precise) to determine trend strength, Volatility Index and Average True Range (ATR) to determine volatility, relative margin requirements to DMI and volatility, reasonable commission of futures contracts.
CSI is calculated by multiplying ATR, a constant and ADXR. The last is to add the latest ADX plus ADX from the last 14 periods divided by two. The formula for CSI is:
CSI = (ADXR x ATR14) x ((V / √M) x (1 / (150 + C))) x 100
where V is the value of the 1c movement in the commodity; M is a margin requirement in USD for commodity contract trading, and C is a broker or commission in USD.
CSI is used as a filter to identify tradable commodities with high ROI in the short run. Commodities with high CSI values relative to other commodities indicate that the underlying commodities are in a strong trend, with high volatility, and relatively low margins and commission rates.