Commodity Channel Index (CCI): How to Read It
The Commodity Channel Index measures how far price has moved from its statistical average. Despite the name, it is used on stocks, forex and crypto to spot strong moves and potential reversals.
The formula
Common settings: 20 periods with +100 and -100 levels
How to read it
- CCI above +100 shows unusually strong upward movement.
- CCI below -100 shows unusually strong downward movement.
- Readings between -100 and +100 reflect normal fluctuation.
- Extreme readings beyond plus or minus 200 are rare and stretched.
- Divergences can warn of fading momentum.
Typical signals
- CCI crossing above +100 as the start of a strong up move.
- CCI dropping back below +100 as weakening momentum.
- CCI rising from below -100 as a potential bounce.
- Divergence with price as a reversal warning.
Pitfalls to avoid
- Has no upper or lower bound, so extremes are relative.
- Can stay extreme during strong trends.
- Noisy on short timeframes.
FAQ
Why the constant 0.015?
It scales the indicator so most readings fall between -100 and +100.
Is CCI only for commodities?
No. It works on any market with price data.
Is CCI like RSI?
Both are momentum oscillators, but CCI is unbounded and measures distance from an average.
Works well with
Simple Moving Average
The Simple Moving Average adds up the last N closing prices and divides by N to create a smooth line. It filters out daily noise so the underlying direction of the trend is easier to see.
🌡️Relative Strength Index
The Relative Strength Index measures the speed and size of recent gains versus losses on a scale from 0 to 100. It helps spot when a market may be stretched too far in one direction.
💪Average Directional Index
The Average Directional Index measures how strong a trend is, regardless of its direction. Paired with the +DI and -DI lines, it also helps identify which side is in control.