The Commodity Channel Index measures how far price strays from its average, helping commodity traders spot overbought, oversold, and potential reversal conditions.
In this guide to understanding the Commodity Channel Index (CCI), we’ll show you what this chart looks like and how it’s calculated. We’ll also explain its components and teach you how to interpret it.
What Is the Commodity Channel Index (CCI)?
The Commodity Channel Index (CCI) is one of the more popular indicators that attempts to offer buy and sell signals; the CCI also is used to identify overbought and oversold areas of price action.
How Is the CCI Calculated?
The CCI is calculated so that roughly 75% of price movement should be between +100 (overbought) and -100 (oversold).
Example Interpretations of the CCI
An example of how a trader might use the CCI for potential buy and sell signals is given below in the chart of the E-mini S&P 500 Futures contract:
Commodity Channel Index Potential Buy Signal
- Commodity Channel Index (CCI) is below oversold line (-100).
- CCI then crosses above the oversold line.
Commodity Channel Index Potential Sell Signal
- Commodity Channel Index (CCI) is above overbought line (+100).
- CCI then crosses below the overbought line.
The Commodity Channel Index (CCI) attempts to signal overbought and oversold conditions that might be used by a trader to buy and sell.
Regulated Brokers: Where Can I Trade Commodities?
Further Reading on Momentum Indicators
These momentum tools complement Commodity Channel Index (CCI): ADX Indicator, MACD Indicator, and Stochastic RSI.
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