Commodity Channel Index CCI
How far price has strayed from its statistical average — unbounded but centred on zero.
Quick answer: The Commodity Channel Index measures how far the current price has deviated from its statistical mean, oscillating around zero with ±100 as the usual normal-range boundaries.
In simple words
Despite the name, CCI is used on any market, not just commodities. It compares the typical price to a moving average of typical price and scales the gap by average deviation. When CCI is above +100, price is unusually high relative to its recent average; below −100, unusually low. Traders use those ±100 lines both as overbought/oversold zones and, in a different style, as breakout triggers when a new trend starts.
Commodity Channel Index — visual
How Commodity Channel Index looks on a chart
CCI oscillates around a zero line, with ±100 marking the edge of the normal range. Moves beyond ±100 flag strong momentum or overbought/oversold extremes.
Professional explanation
Mean deviation, not price
CCI's core is the gap between the typical price (high+low+close)/3 and its N-period average, divided by 0.015 times the mean absolute deviation. The 0.015 constant is chosen so that roughly 70–80% of readings fall within ±100. So ±100 is a statistical normal-range boundary, not an arbitrary level — moves beyond it are genuinely unusual.
Two schools of use
There are two ways to trade CCI. The reversion school treats +100/−100 as overbought/oversold and fades extremes back toward zero — good in ranges. The breakout school treats a cross above +100 as the start of a strong up-move to ride, and below −100 as a down-move — good in trends. Knowing which regime you are in decides which school applies.
Zero line and divergence
The zero line is a momentum divide: sustained readings above zero are bullish, below bearish. Like other oscillators, CCI divergence against price warns of exhaustion. Because CCI is unbounded, extreme spikes (±200, ±300) can occur in violent moves and often mark climaxes.
Formula
Commodity Channel Index formula
CCI = (TP − SMAₙ(TP)) / (0.015 × Mean Deviation)
TP is the typical price (H+L+C)/3. Mean Deviation is the average absolute difference between TP and its SMA. Default N is 20.
- TP — Typical price = (High + Low + Close) / 3
- SMAₙ(TP) — N-period simple moving average of typical price
- Mean Deviation — Average of the absolute differences between TP and its SMA
- 0.015 — Lambert's scaling constant so ~70–80% of values fall within ±100
How it is calculated
- Compute the typical price TP = (High + Low + Close) / 3 for each bar.
- Compute the N-period SMA of TP (default 20).
- Compute the mean absolute deviation of TP from that SMA over N bars.
- CCI = (TP − SMA) / (0.015 × mean deviation).
- Read ±100 as the normal-range boundaries and zero as the momentum divide.
Interpretation & signals
Traders either fade CCI beyond ±100 back to zero (range style) or buy a cross above +100 / sell a cross below −100 (breakout style), and watch divergence and the zero line.
Buy / bullish signals
- Range style: CCI turns up from below −100.
- Breakout style: CCI crosses above +100.
- Bullish divergence against price near an extreme.
- CCI crosses above zero, confirming bullish momentum.
Sell / bearish signals
- Range style: CCI turns down from above +100.
- Breakout style: CCI crosses below −100.
- Bearish divergence against price near an extreme.
- CCI crosses below zero, confirming bearish momentum.
False signals to beware
- Fading ±100 in a strong trend fails as CCI stays extended.
- Breakout crosses whipsaw in a range.
- Unbounded spikes can overshoot far beyond ±100.
Settings, timeframe & conditions
Advantages & limitations
Advantages
- Statistically grounded ±100 boundaries.
- Works both as a reversion and a breakout tool.
- Zero line gives a clear momentum bias.
- Sensitive to the start of new moves.
Limitations & disadvantages
- Unbounded, so extremes are hard to cap.
- Whipsaws when the wrong style is applied to the regime.
- Two conflicting schools of use confuse beginners.
- Noisy on short settings.
Combining Commodity Channel Index with other indicators
- Average Directional Index — ADX tells you whether to use CCI as a breakout tool (strong ADX) or a reversion tool (weak ADX).
- Exponential Moving Average — An EMA trend filter aligns CCI breakout signals with the larger trend.
Practical examples (Nifty & Bank Nifty)
NIFTY example
Nifty breaks out of a multi-week range and CCI surges above +100 and stays there. A breakout-style trader treats that sustained reading above +100 as trend confirmation and stays long, while a reversion trader who shorted the first +100 print is stopped out — a textbook example of matching the CCI style to the regime.
BANKNIFTY example
Bank Nifty is oscillating in a range. Each push to the top sends CCI above +100 and it then curls back below +100 as price stalls — a reversion sell. Each drop to the bottom sends CCI below −100 and it turns up — a reversion buy. In this non-trending phase, fading the ±100 extremes works cleanly.
Common mistakes
- Applying reversion tactics in a trend and breakout tactics in a range.
- Thinking CCI is only for commodities.
- Treating ±100 as hard caps — CCI is unbounded.
- Ignoring the zero-line bias.
Professional usage
Professionals use CCI adaptively: in trending regimes (confirmed by ADX or price structure) they use ±100 crosses as momentum-breakout signals, and in ranges they fade the extremes. The zero line frames the bias and divergence flags exhaustion. It is rarely a standalone system; regime detection decides how its signals are read.
Key takeaway
CCI measures how far price has strayed from its statistical average, centred on zero with ±100 as the normal-range edge. Fade ±100 in ranges, ride crosses beyond ±100 in trends — the regime decides which.
Frequently asked questions
What is the CCI indicator?
What are good CCI settings?
What does CCI above 100 mean?
Is CCI a leading indicator?
How do you use CCI for trend trading?
Why is it called the Commodity Channel Index?
What is CCI divergence?
Is CCI better than RSI?
Voice search & related questions
Natural-language questions people ask about Commodity Channel Index.
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Sources & references
Last reviewed 8 July 2026. Educational content only — not investment advice.