Lesson 18: The Commodity Channel Index (CCI)

The Commodity Channel Index is a technical indicator of the oscillator family developed by Donald Lambert.

Originally, this indicator has been designed to identify cyclical turns on commodities however its use has been extended to the action markets then to others such as the forex thereafter.

ITC measures price changes around average "typical" prices. This indicator estimates that the price changes in cycle with highs and lows that appear at regular intervals.

Donald Lambert recommends using for the CCI calculation period 1/3 of full cycle. The shorter the period of the ICC, the more nervous and volatile the indicator will be.

Finally, note that the CCI consists of a curve and two terminals (+100 and -100).

ITC trading signals

As with most terminal indicators, the main CCI signals will be overbought and oversold.

Purchase signal: When the CCI breaks below -100, then returns to the top. The buyer signal is validated at the time the CCI passes over the -100 terminal.

Sales signal: When the CCI passes over the +100 terminal, then returns below. The vendor signal is validated when the CCI returns below the +100.

Examples of CCI signals