Comm Channel Index

Definition

The Commodity Channel Index (CCI) is a momentum oscillator used in technical analysis that measures an instrument's variations from its statistical mean. The CCI is a very well-known and widely-used indicator that has gained a level of popularity in no small part due to its versatility. It is a fully unbounded oscillator and has no lower or upper limit. The CCI is often used to find reversals as well as divergences. Originally, the indicator was designed to be used for identifying trends in commodities, however, it is now used on a wide range of financial instruments.
The Commodity Channel Index (CCI) was created by Donald Lambert and introduced in 1980. It first appeared in what was then known as Commodities Magazine.

The Commodity Channel Index indicator takes a security's change in price and compares that to its average change in price. CCI's calculation produces positive and negative values that oscillate above and below a Zero Line. Typically a value of 100 is identified as overbought and a reading of -100 is identified as being oversold. However, it is important to note a couple of things. Actual overbought and oversold thresholds can vary depending on the financial instrument being traded. For example, a more volatile instrument may have thresholds at 200 and -200. Frequently, overbought/oversold conditions are seen as a precursor to a price reversal. However, when using CCI, overbought and oversold conditions can often be a sign of strength, meaning the current trend may be strengthening and continuing. When applied to a chart, this indicator contains three plots, displayed in a separate subgraph from the price data.

Default Inputs

Length sets the number of bars used to calculate the CCI, 14 by default.

OverSold sets the value used to determine a bearish/oversold market.

OverBought sets the value used to determine a bullish/overbought market.

OverSColor sets the color for OverSold value.

OverBColor sets the color for OverBought value.