CCI (Commodity Channel Index)
The CCI measures how far price is from its average relative to normal deviation. Learn the formula, the plus and minus 100 levels, trend and reversal strategies.
The Commodity Channel Index (CCI) is an oscillator that measures how far the current price is from its recent average, scaled by how much prices normally deviate from that average. Donald Lambert introduced it in 1980 for commodity markets, but it is used on stocks, currencies and crypto too. Readings above +100 show price unusually far above its average; below minus 100, unusually far below.
The formula#
Typical price (TP) = (High + Low + Close) ÷ 3
CCI = (TP − SMA of TP) ÷ (0.015 × Mean deviation)The mean deviation is the average absolute distance of the typical price from its moving average over the period, commonly 20. Lambert chose the constant 0.015 so that roughly 70% to 80% of readings would fall between +100 and minus 100.
Interpreting CCI levels#
| CCI | Interpretation |
|---|---|
| Above +100 | Strong upward move; momentum or overbought, depending on context |
| Between minus 100 and +100 | Normal range |
| Below minus 100 | Strong downward move; momentum or oversold |
| Beyond +200 or minus 200 | Extreme readings |
Unlike RSI or the stochastic, CCI has no upper or lower bound, so extreme readings can go far beyond 200.
Two ways to use CCI#
As a momentum and trend tool#
Lambert's original approach treated a move above +100 as the start of a strong uptrend and a signal to buy, with an exit when CCI fell back below +100. A move below minus 100 signalled a downtrend. This uses CCI to catch the start of strong moves.
As an overbought and oversold tool#
Many traders instead fade extremes in ranges: sell when CCI is above +100 and turns down near resistance, buy when below minus 100 and turns up near support. As with all oscillators, this works best when the market is not trending strongly. See Mean Reversion.
Other signals#
- Zero line crosses: CCI crossing above zero suggests price has moved above its average; crossing below suggests the reverse.
- Divergence: price makes a new high while CCI makes a lower high (bearish), or the reverse at lows (bullish).
- Trend pullbacks: in an uptrend, a dip of CCI below minus 100 that then turns up can mark the end of a pullback.
Settings#
- 20 periods: the common default.
- Shorter periods: more signals and more extreme readings.
- Longer periods: smoother, fewer signals.
CCI compared with RSI and the stochastic#
| CCI | RSI | Stochastic | |
|---|---|---|---|
| Based on | Distance from average, scaled by deviation | Gains versus losses | Close within high to low range |
| Bounded | No | 0 to 100 | 0 to 100 |
| Common levels | +100, minus 100 | 70, 30 | 80, 20 |
See RSI (Relative Strength Index) and Stochastic Oscillator.
Common mistakes#
- Fading every reading above +100 in a strong trend.
- Comparing CCI values across markets without considering their volatility.
- Using CCI alone without structure or trend context.
Frequently asked questions#
What does the CCI indicator measure?#
How far the typical price is from its moving average, relative to the average deviation, showing unusually strong or weak price levels.
What is a good CCI setting?#
20 periods is the standard. Shorter settings react faster but produce more noise.
Is CCI only for commodities?#
No. Despite its name, it is used on stocks, currencies, indexes and crypto.
Sources#
- Wikipedia, Commodity channel index
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