Cci indicator
Family VI · Charts & indicators
Not to be confused with adx indicator, atr indicator, volume indicator.
CCI indicator stands for Commodity Channel Index, a momentum oscillator introduced by Donald Lambert in 1980. It compares the typical price of a security—the average of high, low, and close—with its simple moving average over a chosen period, then normalises that difference by the mean absolute deviation. The result is plotted as a line that typically fluctuates between roughly −100 and +100, though it is not mathematically bounded.
Calculation
The indicator is calculated in three steps. First, the typical price (TP) is found as (High + Low + Close) / 3 for each bar. Second, a simple moving average (SMA) of TP is taken over n periods. Third, the mean absolute deviation (MAD) is computed as the average of the absolute differences between each TP and the SMA over the same n periods. The CCI is then:
CCI = (TP − SMA) / (0.015 × MAD)
The constant 0.015 is a scaling factor chosen so that approximately 70–80% of values fall between −100 and +100 when the period is 20. Common periods are 14, 20, and 40, but the choice varies by trader and market.
Worked example
Assume a 5-period CCI with the following typical prices: 10, 12, 11, 13, 14. The SMA is (10+12+11+13+14)/5 = 12. The absolute deviations from 12 are 2, 0, 1, 1, 2, giving a MAD of (2+0+1+1+2)/5 = 1.2. For the latest bar, TP = 14, so CCI = (14 − 12) / (0.015 × 1.2) = 2 / 0.018 ≈ 111.1.
Interpretation and caveats
Values above +100 are often taken to indicate strength or an overbought condition, while values below −100 suggest weakness or oversold conditions. Some traders use zero-line crossovers or divergences between price and CCI as signals. However, the indicator is not bounded, and in strongly trending markets it can remain beyond ±100 for extended periods. The period, thresholds, and signal rules vary by trader, market, and timeframe; no single setting is universal.
Often confused with
- adx indicator
- The ADX indicator measures trend strength regardless of direction, whereas the CCI indicator measures price deviation from its average to signal momentum or reversals; the ADX line is typically bounded between 0 and 100, while the CCI oscillates around zero without fixed limits.
- atr indicator
- The ATR indicator quantifies market volatility as an average true range in price units, whereas the CCI indicator is a normalised oscillator that compares typical price to its moving average; the ATR is always positive and unbounded, while the CCI can be positive or negative.
- volume indicator
- The volume indicator displays the number of shares or contracts traded per period, whereas the CCI indicator is derived solely from price data and ignores volume; volume is a raw count, while the CCI is a dimensionless oscillator.
See also
- forex technical analysis indicators
- price action
- fundamental analysis
- support and resistance
- technical analysis
- fibonacci