Commodity Channel Index (CCI)
Developed by Donald Lambert · 1980
Quick Answer
The Commodity Channel Index (CCI) was developed by Donald Lambert and first published in a 1980 issue of Commodities Magazine (now Futures Magazine). Despite the name, the indicator works well across all asset classes including forex, indices, and individual equities.
What is the Commodity Channel Index?
The Commodity Channel Index (CCI) was developed by Donald Lambert and first published in a 1980 issue of Commodities Magazine (now Futures Magazine). Despite the name, the indicator works well across all asset classes including forex, indices, and individual equities. It measures the difference between the current price and its average over a lookback period, divided by a normalising factor based on mean deviation. Unlike the RSI and Stochastic, which are bounded between 0 and 100, the CCI is effectively unbounded — though 75%-80% of readings fall between +100 and -100. Traders use the CCI to identify cyclical extremes, spot emerging trends, and trade breakouts of the ±100 zones.
How It Works
The CCI formula computes the typical price (an average of high, low, and close) and compares it to its simple moving average over the lookback period. The difference is divided by a scaling factor (0.015 × mean deviation) that was chosen by Lambert to ensure roughly 70-80% of readings fall within ±100. When CCI rises above +100, a new uptrend is usually in progress; when it drops below -100, a new downtrend is likely forming. Some traders treat +100 and -100 as overbought/oversold thresholds in ranging markets, while others use them as breakout triggers in trending conditions. Either interpretation can work — the distinction is market context.
Formula
Typical Price (TP) = (High + Low + Close) / 3
SMA of TP = 20-period SMA of Typical Price
Mean Deviation = average of |TP - SMA of TP| over 20 periods
CCI = (TP - SMA of TP) / (0.015 × Mean Deviation)How to Read the CCI
- 1CCI > +100: strong upward momentum, possible new uptrend
- 2CCI < -100: strong downward momentum, possible new downtrend
- 3CCI crossing above +100 from below: bullish breakout signal
- 4CCI crossing below -100 from above: bearish breakout signal
- 5CCI between -100 and +100: ranging conditions or trend pause
- 6Extreme readings (±200+): exhaustion possible
- 7Bullish/bearish divergence against price signals reversals
Strengths and Weaknesses
Strengths
- +Works across all asset classes despite the name
- +Dual-purpose: trend initiator or overbought/oversold signal
- +Strong for spotting momentum exhaustion
- +Reliable divergence signals
- +Flexible — thresholds can be customised
Weaknesses
- −Unbounded scale can make comparison across instruments harder
- −Whipsaws near ±100 in choppy markets
- −Lagging in slow markets
- −The 20-period default may be too short for some instruments
- −Not intuitive for beginners compared to RSI
Best Timeframes
All timeframes. 4H and daily are most common. Short-term traders sometimes shorten to 14 periods for faster signals.
Best for: Identifying emerging trends, trading cyclical markets, and spotting divergences in commodities, currencies, and indices.
Example Strategy
CCI Zero-Line Reversal: On the 1H chart in a confirmed uptrend, wait for the CCI to drop below -100 on a pullback. When it crosses back above -100 on its way toward zero, enter long with a stop below the recent swing low. Exit when CCI crosses above +100 and begins to roll over, or trail a stop along the 20 EMA. The zero-line acts as a momentum midpoint and keeps you in the position while the pullback is still valid.
This example is educational, not financial advice. Always backtest any strategy and manage risk with appropriate position sizing.
Related Indicators
Brokers That Offer the CCI
Any broker with MetaTrader 4, MetaTrader 5, or cTrader supports the CCI as a standard indicator. Below are our top EU-regulated picks.
Frequently Asked Questions
What is the Commodity Channel Index (CCI)?
The Commodity Channel Index (CCI) was developed by Donald Lambert and first published in a 1980 issue of Commodities Magazine (now Futures Magazine). Despite the name, the indicator works well across all asset classes including forex, indices, and individual equities. It measures the difference between the current price and its average over a lookback period, divided by a normalising factor based on mean deviation. Unlike the RSI and Stochastic, which are bounded between 0 and 100, the CCI is effectively unbounded — though 75%-80% of readings fall between +100 and -100. Traders use the CCI to identify cyclical extremes, spot emerging trends, and trade breakouts of the ±100 zones.
Who developed the CCI?
CCI was developed by Donald Lambert in 1980.
What is the formula for the CCI?
Typical Price (TP) = (High + Low + Close) / 3 SMA of TP = 20-period SMA of Typical Price Mean Deviation = average of |TP - SMA of TP| over 20 periods CCI = (TP - SMA of TP) / (0.015 × Mean Deviation)
What timeframes work best with CCI?
All timeframes. 4H and daily are most common. Short-term traders sometimes shorten to 14 periods for faster signals.
What is CCI best used for?
Identifying emerging trends, trading cyclical markets, and spotting divergences in commodities, currencies, and indices.