The Commodity Channel Index (CCI) is a momentum-based oscillator used to determine when an investment vehicle is becoming overbought or oversold.

Key Takeaways:

  • The Commodity Channel Index (CCI) is a technical indicator that measures the difference between the current price and the historical average price.
  • A CCI above zero indicates that the price is above the historical average.
  • While a CCI below zero indicates that the price is below the historical average.

What Does the CCI Tell You?

The CCI is primarily used to identify new trends, monitor overbought and oversold levels, and detect weaknesses in trends through divergences with price movements.

When the CCI moves from negative or near-zero territory to above 100, it may indicate the start of a new uptrend.

Conversely, when the indicator transitions from positive or near-zero readings to below -100, a downtrend may be beginning.

Limitations of the CCI

There are two main limitations:

  • The CCI is used to identify overbought and oversold conditions, but it is highly subjective because the CCI is unbound.
  • The indicator is also lagging, which means it can provide poor signals as the trend signals may come too late.
  • How to find where the indicators are and add them to charts?

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You can download the offline guide here Commodity Channel Index Indicator

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