Commodity Channel Index

Commodity Channel Index

The CCI was developed by Donald Lambert, a technical analyst who originally published the indicator in Commodities magazine (now Futures) in 1980. Despite its name, the CCI can be used in any market and is not just for commodities.

The Formula for CCI is:
(Typical Price – Simple Moving Average) / (0.015 x Mean Deviation)

The CCI was originally developed to spot long-term trend changes but has been adapted by traders for use on all markets or timeframes. Trading with multiple timeframes provides more buy or sell signals for active traders. Traders often use the CCI on the longer-term chart to establish the dominant trend and on the shorter-term chart to isolate pullbacks and generate trade signals.

CCI Indicator

The CCI compares the current price to an average price over a period of time. The indicator fluctuates above or below zero, moving into positive or negative territory. While most values, approximately 75%, fall between -100 and +100, about 25% of the values fall outside this range, indicating a lot of weakness or strength in the price movement.

Key features

  • The CCI is a market indicator used to track market movements that may indicate buying or selling.
  • The CCI compares current price to average price over a specific time period.
  • Different strategies can use the CCI in different ways, including using it across multiple timeframes to establish dominant trends, pullbacks, or entry points into that trend.
  • Some trading strategies based on CCI can produce multiple false signals or losing trades when conditions turn choppy.