# Commodity Channel Index

## Description

The Commodity Channel Index​ (CCI) is a momentum based technical indicator first time introduced by Donald Lambert in 1980, the most often user case is an identifying market cycles, reaching a condition of being overbought or oversold. From technical perspective CCI measures the change in an instrument's price relative to a pre-defined moving average (MA) of the price divided by 1.5% of a normal deviation (D) from that average.

![](https://1239679454-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-LYX3ccu0Q61og0sdCbP%2F-Lt4f5XUyWUbILd7oY_y%2F-Lt4f9nbP8X2r_C441Dn%2Fimage%20\(46\).png?generation=1573126976129402\&alt=media)

## Formula

CCI = (Price - MA)/0.015\*STD

Where:\
**Price** - current close price\
**MA** - selected N-period moving average\
**STD** - Standart deviation of price

## Most useful cases

* **Indication of overbought/oversold levels -**   The most useful case of the commodity channel index is an identifying of price reversals, an instrument would be deemed oversold when the CCI dips below −100 and overbought when it exceeds +100. From oversold levels, a buy signal might be given when the CCI moves back above −100. From overbought levels, a sell signal might be given when the CCI moved back below +100.

![](https://1239679454-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-LYX3ccu0Q61og0sdCbP%2F-Lt4f5XUyWUbILd7oY_y%2F-Lt4f9ndWsNOpQ88OzA8%2Fimage%20\(42\).png?generation=1573126975646351\&alt=media)

* **Divergence/Convergence** - Divergence/Convergence pattern is a form of price action when new high(low) of the price not confirmed with a new high/low of  CCI. Such price and indicator’s behavior can be interpreted as the weakness of current existing trend.

![](https://1239679454-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-LYX3ccu0Q61og0sdCbP%2F-Lt4f5XUyWUbILd7oY_y%2F-Lt4f9nfz5bfW_b7jbdk%2Fimage%20\(14\).png?generation=1573126975688861\&alt=media)