Technical & Chart AnalysisCCICommodity Channel Index
CCI (Commodity Channel Index)
An unbounded oscillator measuring how far price has deviated from its statistical mean, typically over 20 periods.
What CCI (Commodity Channel Index) means
The Commodity Channel Index, developed by Donald Lambert, measures how far the current price has deviated from its own statistical average. Typical price, the average of the high, low and close, is compared with its simple moving average over the lookback period, conventionally 20, and the difference is divided by the mean absolute deviation multiplied by a constant of 0.015. That constant is chosen so that roughly three quarters of readings fall between -100 and +100. Despite the name it is applied to any market, not just commodities.
Because the CCI is unbounded, it is read differently from RSI or the stochastic. Lambert's original approach was a breakout method, buying when the index crossed above +100 to signal an emerging trend and exiting when it fell back. The alternative, more common among retail traders, treats readings beyond plus or minus 200 as stretched and fades them. Divergence against price is also used. The main limitations are sensitivity to the chosen period and a tendency to produce many crossings of the +100 and -100 lines in choppy markets.
Worked example
If EUR/USD has a typical price of 1.0885 against a 20-period average of 1.0850 and a mean deviation of 0.0018, the CCI reads about +130, above the +100 threshold Lambert associated with an emerging uptrend.
Related terms
- OscillatorAn indicator that fluctuates around a centre line or within fixed bounds, used mainly to gauge momentum extremes.
- OverboughtA condition in which an oscillator sits at a high extreme after a rapid advance, indicating stretched momentum rather than a sell signal.
- OversoldA condition in which an oscillator sits at a low extreme after a rapid decline, indicating stretched momentum rather than a buy signal.
- MomentumThe rate at which price is changing, used to judge whether a move is accelerating or losing force.
- DivergenceA disagreement between price and an indicator, where one makes a new extreme that the other fails to confirm.
Frequently asked questions
What does CCI (Commodity Channel Index) mean in forex trading?
An unbounded oscillator measuring how far price has deviated from its statistical mean, typically over 20 periods.
How does CCI (Commodity Channel Index) work in practice?
Because the CCI is unbounded, it is read differently from RSI or the stochastic. Lambert's original approach was a breakout method, buying when the index crossed above +100 to signal an emerging trend and exiting when it fell back. The alternative, more common among retail traders, treats readings beyond plus or minus 200 as stretched and fades them. Divergence against price is also used. The main limitations are sensitivity to the chosen period and a tendency to produce many crossings of the +100 and -100 lines in choppy markets.
What is an example of CCI (Commodity Channel Index)?
If EUR/USD has a typical price of 1.0885 against a 20-period average of 1.0850 and a mean deviation of 0.0018, the CCI reads about +130, above the +100 threshold Lambert associated with an emerging uptrend.
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