CCI (Commodity Channel Index)

The Commodity Channel Index (CCI) measures the difference between the current price and its historical average, scaled by mean deviation. Unlike RSI which is bounded between 0-100, CCI is unbounded and typically fluctuates between -100 and +100, with extreme readings beyond those levels indicating strong momentum.

How CCI Is Used in Trading

Readings above +100 indicate that price is significantly above its average, suggesting strong bullish momentum or an overbought condition. Readings below -100 signal strong bearish momentum or oversold conditions. Traders use these levels as both momentum confirmations and mean-reversion entry points.

The zero-line crossover is another popular strategy. CCI crossing above zero indicates price has moved above its average, signaling bullish pressure. Crossing below zero signals the opposite. These crossovers work particularly well in trending markets.

CCI is especially popular in commodities and forex markets where price tends to be cyclical. Many algorithmic systems use CCI in combination with ADX to distinguish between trending breakouts (CCI extreme + high ADX) and potential reversals (CCI extreme + low ADX).

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