Commodity Channel Index - CCI

Commodity Channel Index Technical Indicator (CCI) measures the deviation of the commodity price from its average statistical price. High values of the index point out that the price is unusually high being compared with the average one, and low values show that the price is too low. In spite of its name, the Commodity Channel Index can be applied for any financial instrument, and not only for the wares.

There are two basic techniques of using Commodity Channel Index:

1. Finding the divergences
   The divergence appears when the price reaches a new maximum, and Commodity Channel Index can not grow above the previous maximums. This classical divergence is normally followed by the price correction.
   


2. As an indicator of overbuying/overselling
   Commodity Channel Index usually varies in the range of ±100. Values above +100 inform about overbuying state (and about a probability of correcting decay), and the values below 100 inform about the overselling state (and about a probability of correcting increase).

Calculation

1. To find a Typical Price. You need to add the HIGH, the LOW, and the CLOSE prices of each bar and then divide the result by 3.
   TP = (HIGH + LOW +CLOSE)/3
   
2. To calculate the n-period Simple Moving Average of typical prices.
   SMA(TP, N) = SUM[TP, N]/N
   
3. To subtract the received SMA(TP, N) from Typical Prices.
   D = TP — SMA(TP, N)
   
4. To calculate the n-period Simple Moving Average of absolute D values.
   SMA(D, N) = SUM[D, N]/N
   
5. To multiply the received SMA(D, N) by 0,015.
   M = SMA(D, N) * 0,015
   
6. To divide M by D
   CCI = M/D

Where:

SMA — Simple Moving Average;
N — number of periods, used for calculation.

Technical Indicators Accelerator/Decelerator Oscillator - AC Accumulation/Distribution - A/D Alligator Average Directional Movement Index - ADX Average True Range - ATR Awesome Oscillator - AO Bollinger Bands - BB Commodity Channel Index - CCI DeMarker - DeM Elder-rays Envelopes Force Index - FRC Fractals Gator Oscillator - Gator Ichimoku Kinko Hyo Market Facilitation Index - BW MFI Momentum Money Flow Index - MFI Moving Average - MA Moving Average Convergence/Divergence - MACD Moving Average of Oscillator - OsMA On Balance Volume - OBV Parabolic SAR Relative Strenght Index - RSI Relative Vigor Index - RVI Stochastic Oscillator Williams’ Percent Range - %R