# Commodity Channel Index (CCI)

## Description <a href="#description" id="description"></a>

&#x20;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://content.gitbook.com/content/urdqk4sHwHHpr4J3s5P6/blobs/HNMP5dfAubFBWYssrgwi/1.png)

## Formula <a href="#formula" id="formula"></a>

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 <a href="#most-useful-cases" id="most-useful-cases"></a>

* **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://content.gitbook.com/content/urdqk4sHwHHpr4J3s5P6/blobs/BREgcmyCCD6CpyMkRy23/2.png)

* **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://content.gitbook.com/content/urdqk4sHwHHpr4J3s5P6/blobs/dW4XCz1JVhTMUec3M1hu/3.png)