Commodity Channel Index
Technical IndicatorsAn oscillator that measures the current price level relative to an average price over a given period. Readings above +100 indicate overbought conditions or the start of a strong uptrend, while below -100 signals oversold conditions or the start of a strong downtrend.
What Is the CCI?
The Commodity Channel Index (CCI), developed by Donald Lambert in 1980, was originally designed for commodities but works equally well on forex pairs. It measures how far the current typical price (average of high, low, and close) deviates from the mean typical price over a period (default 20). The result is divided by a constant (0.015) to ensure that about 75% of values fall between -100 and +100.
CCI Trading Signals
When CCI crosses above +100, it can signal either an overbought condition in a range or the start of a strong uptrend. When it crosses below -100, the opposite. The key is context: if the Average Directional Index shows the market is trending (ADX above 25), treat CCI breaks above +100 as trend-continuation entries. If ADX is below 20 (ranging), treat the same break as an overbought reversal signal.
Settings and Practical Use
The default 20-period works for swing trading. For day trading, 14 periods provides faster signals. Some traders use the +200/-200 levels for extreme conditions. CCI is versatile: it works as a trend-following tool (entering on breaks of +100/-100 in the trend direction), as a mean-reversion tool (fading moves at extreme levels in ranges), and as a divergence tool. Pair it with Bollinger Bands or a Moving Average for confirmation before entering.
Related Terms
RSI (Relative Strength Index)
A momentum oscillator that measures the speed and magnitude of recent price changes on a scale of 0 to 100. Readings above 70 suggest overbought conditions; below 30 suggest oversold conditions.
Stochastic Oscillator
A momentum indicator that compares a currency pair's closing price to its price range over a set number of periods. It generates %K and %D lines that oscillate between 0 and 100, with readings above 80 considered overbought and below 20 oversold.