Commodity Channel Index cross

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Commodity Channel Index cross

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Commodity Channel Index (CCI) is a momentum indicator used to spot price reversals, price extremes and trend strength. Readings above +100 imply an overbought and readings below -100 imply an oversold condition. Overbought/oversold conditions may indicate that the price will correct.

About 70%-80% of the CCI values are between +100 and −100, so a buy or sell signal will be generated only 20%-30% of the time. When the CCI moves above +100, a coin is entering a strong uptrend and a buy signal is generated. The position should be closed when the CCI moves back below +100. And vice versa.

Traders can also use CCI to spot reversals and divergences that can also be applied to increase the robustness of signals.

Divergences can also be applied to increase the robustness of signals. A positive divergence (price is up yet CCI is down) below −100 would increase the robustness of a signal based on a move back above −100. A negative divergence above +100 would increase the robustness of a signal based on a move back below +100.