Commodity Channel Index

Commodity Channel Index (CCI)

The Commodity Channel Index measures the deviation of the price from its average statistical price. High values show that the price is unusually high compared with its average, and low values show that it is unusually low. Despite its name, the CCI can be used for any financial instrument, not just commodities.

Using the CCI

There are two basic techniques for using the Commodity Channel Index:

• Finding divergences. A divergence appears when the price reaches a new high while the CCI fails to rise above its previous high. Such a divergence is usually followed by a price correction.
• Overbought and oversold levels. The CCI usually moves between +100 and -100. Values above +100 point to an overbought market and a likely correction; values below -100 point to an oversold market and a likely rise.

1.33001.3400100-100

CCI 14 EURUSD · H1

CCI moves above +100 when the price rises fast and below -100 when it falls.

Calculation of CCI

TP = (HIGH + LOW + CLOSE) / 3
SMA = SMA(TP, N)
D = SUM(ABS(TP - SMA), N) / N
CCI = (TP - SMA) / (0.015 * D)

Where:

• TP is the typical price of the bar;
• SMA is the simple moving average of the typical price over N bars;
• D is the mean deviation of the typical price from its average;
• N is the indicator period.