# 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://4186075531-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-LD6FsRvQ3jgwJIg6O7r%2F-LEoF9mFKMnqwLt6MZfx%2F-LEoJGJ89CJR5441X7hf%2Fimage.png?alt=media\&token=3a2eddbd-f474-4598-b357-c862f61174a3)

## 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://4186075531-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-LD6FsRvQ3jgwJIg6O7r%2F-LEoF9mFKMnqwLt6MZfx%2F-LEoMSVOcUjMEdcc6GD3%2Fimage.png?alt=media\&token=2592e1b0-56b0-4a8b-80a5-d323c0d07287)

* **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://4186075531-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-LD6FsRvQ3jgwJIg6O7r%2F-LEoF9mFKMnqwLt6MZfx%2F-LEoMjnNNnrctHbCMrJd%2Fimage.png?alt=media\&token=392c55c4-fbb4-406a-b351-cb741c9ad182)