What it is
CCI was created by Donald Lambert for commodities but works on any market. It compares the current typical price, the average of the high, low and close, with its recent average, and divides by how far prices usually stray. The result has no fixed top or bottom, which is why readings of plus 200 or minus 300 are possible in big moves.
The 0.015 constant in the formula was chosen so that roughly three quarters of readings land between plus 100 and minus 100. Beyond those lines, price is moving unusually hard away from its average.
How it is calculated
1. Typical price = (high + low + close) divided by 3, for each candle. 2. Take the simple average of the typical price over 20 candles. 3. Mean deviation = the average distance, ignoring sign, between each of those 20 typical prices and that average. 4. CCI = (typical price minus its average) divided by (0.015 times the mean deviation).
Settings
| Setting | Default | Range | What it changes |
|---|---|---|---|
| Length | 20 | 2 to 200 | Candles in the average and the deviation. Shorter makes CCI jumpier and reach the extremes more often; longer makes extremes rarer and more meaningful. |
How to read it
How to trade it
- 1
Trend version: on a 1 hour US30 chart, buy when CCI(20) crosses above plus 100 while price is above its 200 period average.
- 2
Place the stop below the low of the last few candles, often 60 to 100 points on 1 hour US30.
- 3
Exit when CCI falls back below plus 100, or at 2 times the stop, whichever comes first.
- 4
Range version: when gold is ranging, buy the candle that brings CCI back above minus 100 from below, with the stop under the range low and the target at the middle of the range.
- 5
Do not use the range version if price is breaking out of the range on strong candles.
A trend buy on CCI is proved wrong when CCI drops back below zero or price closes below the entry candle's low. A range buy from minus 100 is proved wrong when price closes below the range low.
WickSpeak runs in your browser with nothing to install. When you add CCI, it writes a plain-English reading on the live candle: what the indicator is, what it is doing right now, how to trade it and what would prove that reading wrong. It says where CCI sits against plus 100, zero and minus 100, whether it is rising or falling, and which of the two styles, trend or range, the reading suits.
In Playbook, our no-code strategy builder, CCI can be a condition in a play. It can test whether CCI: crosses above a level you set; crosses below a level you set; is above a level you set; is below a level you set; is between two levels you set; is rising; is falling. Each condition can run on any of 12 timeframes from 1 minute to weekly, combined with up to 11 others, and the play can be backtested on past candles with your own costs and turned into alerts on screen, by email or by phone push.
There is also a WickSpeak CCI. Its line is coloured by strength: faint when the push is weak, glowing when it is strong, mint above zero and pink below it. Crosses of zero are marked only once the candle has closed, so a marker never appears and then vanishes mid-candle. A gold marker shows a stretched reading, meaning the strongest few percent of its own range or a reading past a fixed extreme level. Divergences between price and the oscillator are drawn on both the chart and the indicator, and a chip shows the same reading on a higher timeframe.
Best markets and timeframes
Works on gold, indices and forex from 15 minute to daily charts. On fast 1 to 5 minute charts it hits the extremes constantly, so a longer length such as 30 or more helps.
Common mistakes
- Treating plus 100 as overbought and selling every time, which loses repeatedly in a trend.
- Ignoring that CCI has no cap, so a reading of plus 250 is not twice as tradeable as plus 125.
- Using divergence alone as an entry without waiting for price to break a level.
Works well with
Questions traders ask
What is the best CCI setting?
20 is the standard and works on most charts. Some traders use 14 for faster signals on intraday charts, or 50 and above as a slower trend filter.
Is CCI overbought above 100?
Not necessarily. Above plus 100 means price is pushing strongly above its average, which in a trend is a sign of strength. It only behaves like overbought in a sideways market.
What is the difference between CCI and RSI?
RSI is bounded between 0 and 100 and compares up closes with down closes. CCI has no limits and measures distance from an average relative to normal deviation, so it can stretch much further in strong moves.
Why does CCI use 0.015?
Lambert chose 0.015 so that about 70 to 80 percent of readings fall between plus 100 and minus 100. It is a scaling number, not something to tune.