Oscilattor: Commodity Channel Index (CCI)

The CCI indicator is widely used to predict price reversals. It quantifies the relationship between the asset price, the moving average (MM) of the asset and the standard deviations of this average.

How to interpret

1. Conditions of overbought / oversold. In a normal case, the CCI fluctuates in the ± 100 range. A rise beyond +100 means the pair is overbought and signals a downward correction. A fall beyond -100 means that the pair is oversold, signaling a correction up.
The dynamics of the indicator depend on the number of intervals used to form it. A shorter indicator (with a smaller number of ranges) will be more volatile, so more points will be outside the ± 100 range. Similarly, with more intervals, more points will be within the ± 100 range.
2. Divergence / Convergence. The divergence occurs when the price forms a higher maximum, but the CCI forms a lower one.This can be confirmed by the CCI breaking below zero or a breach of support in the price chart. Likewise, convergence occurs when the price forms a lower minimum but the CCI forms a higher minimum. This can be confirmed by a breach of the CCI above zero or the breach of resistance in the price chart.


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