Commodity Channel Index (CCI) measures the difference between current price and its average over time, helping traders spot overbought or oversold market conditions.
What Is the Commodity Channel Index (CCI) Indicator?
The Commodity Channel Index (CCI) is a momentum oscillator that swings around a zero line and shows how far price is stretched away from its average. It was built to spot when a move is getting extended, when momentum is picking up or fading, and when a reversal might be brewing.
Unlike bounded oscillators like RSI that live between 0 and 100, CCI is unbounded, so it can keep pushing past “normal” levels when the market is trending hard.
Reading it is straightforward. Above zero, momentum is bullish. Below zero, momentum is bearish.
Most traders watch +100 and -100 as the main stretch zones: above +100 is typically “overbought,” below -100 is typically “oversold.” The zero line matters just as much because it’s the quick trend filter—crosses through zero often line up with momentum flipping.
Key Characteristics of the CCI
Unbounded oscillator: Can run past -100 and +100 when volatility expands or a trend accelerates
Deviation measurement: Measures how far price is from its average over a chosen lookback
Overbought threshold: Above +100 often signals price is stretched and upside may be tiring
Oversold threshold: Below -100 often signals downside is stretched and selling pressure may be fading
Trend confirmation: Zero-line crosses help confirm when momentum flips direction
Versatile application: Works across equities, FX, index futures, and commodities—just adjust settings to the product
CCI Calculation: Formula and Methodology
How to Read CCI: Values, Thresholds, and Market Conditions
What Do the +100 and -100 CCI Levels Mean?
Most traders treat +100 and -100 as the main “stretch” lines. Above +100, price is meaningfully above its recent mean and buyers may be getting crowded. Below -100, price is meaningfully below its mean and selling may be overdone.
You’ll also see +200 and -200 used as extreme zones—those show up less often and usually mean either a blow-off move or a trend that’s ripping.
These levels aren’t laws. If you’re trading something jumpy like crude oil, natural gas, or a spicy FX cross, ±150 or ±250 can make more sense. On slower products, tighter bands can work better.
What Does CCI Tell You About Momentum Strength?
Positive CCI = bullish momentum (price above its average). Negative CCI = bearish momentum (price below its average). The size of the number matters because it’s the “how stretched” part.
+150 is not the same market as +50, and -150 is a different kind of pressure than -50. In normal conditions, CCI spends most of its time between -100 and +100, which is basically the “nothing extreme” zone.
What Does a CCI Zero-Line Crossover Signal?
The zero line is your quick read on who’s in control. A cross above zero means price has pushed back above its average and momentum is turning up. A cross below zero says the opposite.
In clean trends, zero-line crosses can be decent triggers; in messy ranges, they can chop you up unless you’re pairing them with structure or a volatility filter.
CCI Formula Explained: Components and Meaning
CCI is built to quantify “distance from average” in a way that’s comparable across time. The formula is: CCI = (Typical Price - Simple Moving Average) / (0.015 × Mean Deviation). Each component plays a distinct role in generating the oscillator signal.
Typical Price is (High + Low + Close) / 3. Using HLC instead of just the close helps the indicator reflect the whole session range, which is useful when candles have long wicks or when closes are noisy.
Component | Formula | Purpose |
|---|---|---|
Typical Price (TP) | (High + Low + Close) / 3 | Represents the session’s “fair” average price |
Simple Moving Average (SMA) | Average of TP over n periods | Baseline trend/mean reference |
Mean Deviation (MD) | Average of |TP - SMA| values | Measures typical dispersion around the mean |
CCI | (TP - SMA) / (0.015 × MD) | Normalizes deviation into an oscillator |
How Do You Calculate CCI Step by Step?
The math is basically four moves. Calculate Typical Price each bar. Take the SMA of TP across your lookback (often 14 or 20). Compute mean deviation by averaging the absolute distance between each TP and the SMA.
Then plug it all into the formula: (current TP - SMA) divided by (0.015 × mean deviation).
Mean deviation isn’t standard deviation. It uses absolute values instead of squaring, so it’s simpler and usually less “warped” by one crazy outlier candle.
Why Does CCI Use 0.015 and What Do Settings Change?
The 0.015 constant is just a scaling tweak so most readings land between -100 and +100 in typical conditions. When price starts stretching further from the moving average, CCI prints bigger numbers—meaning momentum is stronger, but also that the move is more extended.
Settings matter a lot: short lookbacks (6–10) react fast but whip around in chop, while longer lookbacks (26–50) smooth the noise and catch broader swings, at the cost of lag.
Trading Signals and CCI Strategies
The classic CCI play is the overbought/oversold re-entry. A common buy setup is: CCI prints below -100, then comes back above -100. That’s the “selling pressure is fading” signal.
The mirror sell setup is: CCI pushes above +100, then drops back below +100.
The big mistake is firing the moment it hits ±100. Strong trends can pin CCI in extreme territory for a long time, so waiting for it to exit the zone usually keeps you out of the worst fade trades.
This works best when you also see something on price—like a hammer candle, an engulfing pattern, or a clean break back above a prior swing low/high or a level like VWAP, prior day high/low, or a weekly pivot.
Divergence represents a powerful tool for identifying trend reversals before they show up cleanly on price. Bullish divergence is price making a lower low while CCI makes a higher low—downside momentum is weakening. Bearish divergence is price making a higher high while CCI makes a lower high—upside momentum is fading.
Divergence is early by nature, so it’s cleaner when you wait for confirmation like a zero-line cross, a break of a micro trendline, or a reclaim/loss of a key support/resistance shelf.
In trend mode, CCI can be used more as a momentum confirmation tool than a fade signal. In an uptrend, a push above +100 can confirm strength and sometimes works as a continuation trigger, especially if price is also clearing a resistance level. In a downtrend, a break below -100 does the same for shorts.
For risk, a simple approach is stops beyond the last swing high/low; an indicator-style exit some traders use is bailing on longs when CCI loses zero, or when it falls back under -100 depending on how aggressive they want to be.
Key CCI Trading Signals
Oversold Buy Signal: CCI drops below -100, then crosses back above -100
Overbought Sell Signal: CCI rises above +100, then crosses back below +100
Bullish Divergence: Price makes a lower low while CCI makes a higher low
Bearish Divergence: Price makes a higher high while CCI makes a lower high
Momentum Confirmation: CCI above +100 supports an uptrend; below -100 supports a downtrend
Zero-Line Crossover: Crosses through zero often mark a momentum regime shift
CCI in Chart Analysis and Multi-Indicator Strategies
How to Use CCI to Confirm Support and Resistance Levels
CCI won’t draw support and resistance for you, but it’s useful for validating levels. If price is pressing into a known resistance zone and CCI is overbought or printing bearish divergence, that level has a better chance of holding.
If price is testing support and CCI is oversold or showing bullish divergence, it’s a hint sellers are losing control and you may get a bounce. It’s basically a momentum lie detector for your horizontal levels.
Best Indicator Combinations With CCI (Moving Averages, RSI, Volume)
Combining CCI with moving averages creates a robust approach. Use the moving average (like a 20 EMA or 50 SMA) to define trend and only take CCI signals in that direction. CCI + RSI can also work well when both line up—dual confirmation tends to cut down on random entries.
Volume tools (volume profile, OBV, plain old relative volume) help too, because a CCI signal backed by real participation is usually more tradable than one happening on thin tape.
If you’re mixing indicators, journaling matters. Different products behave differently, and the “best” combo for ES futures won’t necessarily be the best combo for EUR/USD or gold.
CCI Pros, Cons, and Best Practices for Traders
What Are the Benefits of Using CCI?
CCI is flexible. It works on stocks, FX, commodities, and futures, and it holds up across timeframes from a 5-minute chart to weekly swings. It’s also useful in two modes: confirming trend strength (bigger readings, stronger momentum) and flagging potential reversals (divergence and re-entries back inside ±100).
Since you can tune the period and thresholds, you can fit it to the volatility of the instrument instead of forcing one-size-fits-all settings.
What Are CCI’s Common Limitations and False Signals?
CCI is sensitive, which is great in trends but rough in chop. In sideways markets it can throw a lot of false signals because price keeps mean-reverting and the oscillator keeps snapping back and forth. Settings matter more than people think—14 or 20 is a starting point, not a rule.
And if you trade CCI in isolation without structure, levels, or price action confirmation, you’ll end up taking a lot of low-quality trades, especially when the oscillator disagrees with the broader context.
CCI Best Practices: Timeframes, Thresholds, and Risk Management
Higher timeframe analysis: Use daily/4H/weekly context to avoid getting chopped up
Price action confirmation: Line CCI signals up with support/resistance, trendlines, and candle structure
Parameter optimization: Tune the lookback to the product (S&P 500 futures vs. copper vs. USD/JPY won’t behave the same)
Threshold strictness: Widen thresholds in high-vol regimes; tighten them in slow markets
Stop loss implementation: Define risk at the swing level or invalidate the setup quickly when momentum flips
Backtesting validation: Test it on your market and timeframe before trusting it with real size
How Does CCI Look on a Chart and Confirm Price Action?
CCI plots as a single line under the chart with reference lines at +100, 0, and -100 (sometimes ±200). You’re mainly watching whether CCI is confirming what price is doing. If price makes a new high and CCI also makes a new high, momentum is backing the move.
If price tags a fresh high but CCI can’t beat its prior peak, that’s a classic “trend is getting tired” warning.
How Do You Turn CCI Signals Into Repeatable Improvements Over Time?
CCI can highlight overbought/oversold stretches, zero-line regime shifts, and divergence, but the real edge comes from verifying how those signals perform in your market, timeframe, and ruleset. That means reviewing trades in context: what the threshold was (±100 vs. wider bands), whether the setup aligned with support/resistance and trend filters, and how exits behaved when CCI flipped back through zero or re-entered the “normal” zone. Keeping a consistent log also helps separate “good signal, bad execution” from genuinely low-quality conditions like choppy ranges. A structured trade journal makes this easier by tracking screenshots, notes, and PnL metrics so you can compare outcomes across settings and products; for example, using Rizetrade trading journal analytics and performance tracking dashboard can help organize CCI-based trades and surface patterns in win rate, expectancy, and drawdowns that aren’t obvious from memory alone.