Investing & Trading

Commodity Channel Index Average Study

By Samantha Baltodano


TL;DR:

The Commodity Channel Index (CCI) Average plots an average of the Commodity Channel Index over a defined time period.


It is used to identify trend cycles and trade signals in the markets. The CCI is calculated so that 70-80% of all price activity falls between +100 and -100 on its vertical scale, and is often used to indicate overbought and oversold markets, similar to an oscillator.


What Is the Commodity Channel Index Average?

The Commodity Channel Index (CCI) Average study plots an average of the Commodity Channel Index over a defined time period.


The CCI Average, like the Commodity Channel Index, is used primarily to identify trend cycles in the markets and subsequent trade signals. 


The CCI is calculated so that 70-80% of all price activity falls between +100 and -100 on its vertical scale. 


Many analysts believe a long position is indicated when the CCI exceeds +100 while a short position is indicated when the CCI falls below -100 but these values should be based more on your market analysis. 


For example, you may decide that for the market you are evaluating, a -125 indicates taking a short position while a +150 indicates taking a long position.


Many analysts also use this indicator to indicate overbought and oversold markets, much like an oscillator. 


Breakouts above the overbought line (default at 100) indicate an overbought market and breakouts below the oversold line (default of -100) indicate an oversold market. 


The CCI often misses the early part of a new move because of the amount of time it spends in the neutral position (between the overbought and oversold lines). Many analysts believe the CCI Average crossing above or below zero identifies market conditions before the overbought and oversold lines are crossed.


Summary


  • The Commodity Channel Index (CCI) Average study plots an average of the Commodity Channel Index over a defined time period, and is used primarily to identify trend cycles and trade signals in the markets.
  • The CCI is calculated so that 70-80% of all price activity falls between +100 and -100 on its vertical scale. Many analysts use this indicator to indicate overbought and oversold markets, similar to an oscillator.
  • Breakouts above the overbought line (default at 100) indicate an overbought market and breakouts below the oversold line (default of -100) indicate an oversold market. 


Commodity Channel Index Average is just one of many studies that Archaide automates. For a full list of strategies and studies available click here.


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