Commodity Channel Index (CCI)
period = 20 (10–50) Overview
The Commodity Channel Index (CCI), introduced by Donald Lambert in Commodities Magazine in 1980, measures how far price has deviated from its statistical mean. Originally designed to identify cyclical trends in commodities, CCI has evolved into a versatile indicator widely used across equities, forex, and cryptocurrency markets for identifying overbought/oversold conditions and potential trend reversals.
CCI's power lies in its statistical foundation - by comparing current price to its average change in price and normalizing with Lambert's constant (0.015), it creates a scale where approximately 70-80% of values fall between -100 and +100. This makes movements beyond these thresholds statistically significant, providing traders with high-probability signals when markets reach extreme conditions.
Interpretation & Trading Signals
Overbought/Oversold Strategies:
- Traditional Reversal: Buy when CCI moves back above -100 from oversold; sell when dropping below +100 from overbought
- Trend Strength: In strong uptrends, +100 breakout shows confidence - stay long; in downtrends, -100 breakdown confirms bearishness
- Variable Thresholds: Each asset has unique levels - some reverse at ±150, others at ±325
- Extended Extremes: Strong trends can keep CCI overbought/oversold for weeks - avoid first signal
Proven Trading Systems (2025 Research):
- Optimal Setting: CCI(50) crossing up through -100 on daily charts - 1,108% return over 20 years
- Entry Focus: CCI better for entries than exits - combine with trailing stops
- Zero Line Strategy: Above zero = uptrend confirmed; below zero = downtrend dominance
- Multiple Timeframes: Use higher timeframe CCI for trend, lower for timing
Divergence Trading:
- Bullish Divergence: Price makes lower lows while CCI makes higher lows - reversal up likely
- Bearish Divergence: Price makes higher highs while CCI makes lower highs - reversal down likely
- Hidden Divergences: Trend continuation signals when price and CCI move together
- Confirmation Required: Best results when combined with volume or momentum indicators
Example Usage
Code examples will be available once the Rust implementation is complete.
Performance Analysis
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