Commodity Channel Index (CCI)
Overview
The Commodity Channel Index measures an asset's deviation from its statistical mean price, oscillating around a zero line with no fixed upper or lower bound. Originally designed for commodities by Donald Lambert, CCI is effective across all markets. Readings above +100 indicate strong bullish momentum (potential overbought), while readings below -100 signal strong bearish momentum (potential oversold).
Key Concepts
Oscillates around zero with +100 and -100 as key thresholds. CCI above +100: strong bullish momentum / overbought. CCI below -100: strong bearish momentum / oversold. Zero-line crossovers signal directional shifts. Divergences between CCI and price signal potential reversals. Default period is 20.
Entry Signals
Enter long when CCI crosses above +100 from below, signalling the start of a strong bullish move. Buy on a CCI pullback to the zero line during a sustained uptrend (zero-line bounce). Go short when CCI crosses below -100 from above, confirming bearish momentum. Look for bullish divergence when CCI makes a higher low while price makes a lower low near support.
Exit Signals
Exit longs when CCI drops back below +100 after reaching extreme readings above +200. Close shorts when CCI rises back above -100 after reaching extreme lows. Take profits at CCI divergences — CCI weakening while price continues in the trend direction. Trail stops while CCI remains above the zero line for long positions.
Best Timeframes
15M, 1H, 4H, Daily
Pro Tips
CCI's unbounded nature means extreme readings (+200, +300) can persist during strong trends — do not blindly fade CCI extremes in trending markets. Use the zero-line bounce as a high-probability continuation trade during established trends. For mean reversion, combine CCI with Bollinger Bands: CCI at -200 with price touching the lower Bollinger Band provides strong convergence.
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