Commodity Channel Index (CCI)
How far has price strayed from its average? CCI uses the mean deviation as its ruler, and a move above +100 is often seen as the start of strength.
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Text version · Oscillators & Momentum, lesson 3: “Commodity Channel Index (CCI)”
How far has price strayed from its average? CCI uses the mean deviation as its ruler, and a move above +100 is often seen as the start of strength.
How far from the average?
CCI compares the typical price with its average over the last N bars, using mean deviation as the ruler: 1.5 rulers away puts CCI at ±100.
No ceiling
Unlike RSI, CCI has no fixed upper or lower limit. Above +100 is the strong zone, below −100 the weak zone, and in extreme markets it can go far beyond ±200.
Two uses: with the trend and bounces
Crossing above +100 means the typical price is clearly above its average, often treated as a cue to go long with the trend; climbing back from below −100 is treated as a bounce signal. In a trendless range, buying +100 often means buying the top of the range.
Key takeaways
- CCI compares the typical price with its average over the last N candles (usually 20), then divides by 0.015 × the mean deviation. It reaches ±100 at about 1.5 mean deviations from the average.
- CCI has no fixed upper or lower limit. Above +100 is the strong zone; below −100 is the weak zone.
- Crossing above +100 is often used as a trend-following buy signal, and recovering from below −100 as a bounce signal. In a ranging market, the first one tends to buy the top.
Try it yourself
You can do these exercises in this lesson's interactive simulation:
- Click "Example: CCI rises from 50 to 180": which zone is it in now? In the lower panel, see how many "rulers" the typical price has deviated.
- Look at "High / low of this stretch": how high did CCI go in the "Trend" scenario? Does it have a limit?
- Switch to "Choppy" and press ▶, watching the "bounce" signals that climb back from below −100. How did each turn out 10 bars later?
- Change the period from 20 to 40: how do the purple channel and the number of signals change?
Quiz and explanations
- 1. CCI rises from 50 to 180. What does that mean?
- Answer: Price is clearly above its average and has entered the strong zone.Crossing above +100 means entering the strong zone.
- 2. What's CCI's range?
- Answer: No fixed upper or lower limit.In extreme moves it can go far beyond ±200.
- 3. A candle's typical price exactly equals the average of the last 20 typical prices. What's the CCI?
- Answer: 0.There's no deviation from the average, so the numerator is 0 and CCI is 0.
Terms in this lesson
- CCI (Commodity Channel Index): An indicator of how far the typical price strays from its average, with ±100 as common strength thresholds.
- false signal (False Signal): An indicator gives a signal, but price doesn't move the way it suggested.
- mean deviation (Mean Deviation): The average of how far each value is from the mean, ignoring sign; CCI uses it as a ruler for how far price has strayed.
- typical price (Typical Price): (High + low + close) ÷ 3, a single number for a candle's price level, used by CCI and MFI.