# Commodity Channel Index – CCI

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There are two main ways to use the Commodity Channel Index: 1. to search for discrepancies The discrepancy is formed when the price reaches a new high, and the Commodity Channel Index does not manage to rise above the previous highs. This classic divergence is usually followed by a price correction. 2. as an indicator of overbought / oversold The index of the Commodity Channel usually ranges in the range of ± 100. Values above +100 indicate the overbought condition (and the probability of corrective decay), and values below -100 indicate the oversold condition (and the probability of corrective recovery). ## Calculation of Commodity Channel Index – CCI

1. Find a typical price. For this it is necessary to add a maximum, a minimum and the closing price of each bar and divide the sum by 3. TP = (HIGH + LOW + CLOSE) / 3 2. Calculate the n-period simple moving average of typical prices. SMA (TP, N) = SUM [TP, N] / N 3. Subtract the received SMA (TP, N) from the typical TP prices of each of the preceding n periods. D = TP-SMA (TP, N) 4. Calculate the n-period simple moving average of the absolute values of D SMA (D, N) = SUM [D, N] / N 5. Multiply the received SMA (D, N) by 0.015 M = SMA (D, N) * 0.015 6. Divide M by D CCI = M / D Where: HIGH – the maximum price of a bar; LOW – the minimum price of a bar; CLOSE – the closing price; SMA – simple moving average; SUM is the sum; N is the number of periods used for the calculation.]]>

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