Commodity Channel Index Indicator

 


In stock Market to predict the future trends, technical analysis indicators help the traders to make decisions with high probability. One such underrated yet powerful tool is the Commodity Channel Index (CCI). Originally developed for commodities, CCI is now widely used to identify overbought and oversold levels in stocks, indices, and forex markets. Thinking to start your trading journey, MHV Education offers Stock Market Trading Course for Beginners guiding you all the way towards financial freedom.


📉 What is the Commodity Channel Index (CCI)?
The Commodity Channel Index is a momentum-based oscillator developed by Donald Lambert. Perfect for traders who execute there trades on the basis of deviation of stock prices from its average price over a period of 14 or 20 days.

Formula:

CCI = (Typical Price – SMA) / (0.015 × Mean Deviation)
Where:

Typical Price = (High + Low + Close) / 3

SMA = Simple Moving Average of Typical Price

0.015 = Constant to scale CCI into a readable range

🔍 How to Use CCI in Trading?
If CCi is above +100, wait for it go back down and short the markets when it does.
If CCI is below -100, and then it goes above you may see a bullish movement in the underlying asset.

Trend Detection

Sustained CCI above +100 = Strong uptrend

Sustained CCI below -100 = Strong downtrend

Divergence Trading

Bullish divergence: Price makes lower lows, CCI makes higher lows

Bearish divergence: Price makes higher highs, CCI makes lower highs

📊 Why Traders Love the CCI Indicator
Works well for intraday, swing, and positional trading

Helps filter false breakouts

Provides early trend reversal signals

Easy to combine with other indicators like RSI, MACD, and Supertrend

Looking for Stock Market Courses near me, MHV Education brings you all the types of trading courses which will best suit your needs.

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