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Commodity Channel Index

CCI - Commodity Channel Index

Commodity Channel Index Technical Indicator measures the deviation of the commodity price from its average statistical price. High values of the index indicate that the commodity price is too high, while low values show that the price is unusually below average. Commodity Channel Index usually varies in the range of +100. If index value is higher than +100 it informs about overbuying state of the market with a probability of decay.

The values below 100 indicate the overselling state and increase is to be expected.

This indicator is also used to find divergences that appear if the price reaches its new maximum while indicator is staying on or below the previous maximum. This divergence is normally followed by the price correction.

Calculation:

1. To find a typical price it is necessary to add the maximum, the minimum, and the closing prices of each bar and then divide the result by 3.
   TP = (HIGH + LOW + CLOSE) / 3
2. To calculate the n-period simple moving average of typical prices.
   SMA (TP, N) = SUM (TP, N) / N
3. To subtract the received SMA(TP, N) from typical prices (TP) of every previous n-period.
   D = TP - SMA (TP, N)
4. To calculate the n-period simple moving average of absolute D values.
   SMA (D, N) = SUM (D, N) / N
5. To multiply the result.
   SMA (D, N) ia 0,015
   M = SMA (D, N) * 0,015
6. To divide M by D.
   CCI = M / D

Where:

HIGH - bar maximum price;
LOW - bar minimum price;
CLOSE - closing price;
SMA - simple moving average;
SUM - sum;
N - number of periods used for calculation.

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Similar information about indicators you can find in information system of trade platform MetaTrader 4 (Help-> Help Topics [F1] -> Ananlitics -> Technical Indicators).