Commodity Channel Index (CCI) Indicator Guide
CCI measures deviation from average price. Learn how this momentum oscillator identifies overbought/oversold conditions and trend reversals.
What Is CCI?
Created by Donald Lambert in 1980, the Commodity Channel Index (CCI) measures how far price has moved from its moving average, normalised by mean deviation. Despite its name, it works on any instrument, not just commodities.
Calculation
CCI = (Typical Price - SMA of Typical Price) / (0.015 × Mean Deviation). Typical Price = (High + Low + Close) / 3. The 0.015 constant makes about 70-80% of values fall between +100 and -100.
Reading CCI Signals
- Above +100: Strong bullish momentum — overbought
- Below -100: Strong bearish momentum — oversold
- Above +200: Extremely overbought — potential reversal
- Below -200: Extremely oversold — potential bounce
- Crossing +100 upward: Bullish signal
- Crossing -100 downward: Bearish signal
- Divergence between price and CCI: Potential trend reversal
Trading with CCI
CCI is a momentum oscillator, not a standalone system. Use it alongside trend indicators. A common setup: 20-period EMA for trend, CCI(20) for entries.
In an uptrend (price above EMA): Buy when CCI crosses above -100 from oversold. Sell when CCI crosses below +100 from overbought.
In a downtrend (price below EMA): Sell when CCI crosses below +100. Cover when CCI crosses above -100.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70-80% of retail investor accounts lose money when trading CFDs. Backtesting does not guarantee future results. Always consider whether you can afford the potential loss of your capital.