CCI - Commodity Channel Index

Overview

The Commodity Channel Index (CCI) is a versatile momentum-based oscillator developed by Donald Lambert in 1980. Originally designed for commodity trading, it measures the deviation of price from its statistical mean, normalized by mean absolute deviation.

Formula

TP = (High + Low + Close) / 3
SMA = Simple Moving Average of TP over period
Mean Deviation = SUM(|TP - SMA|) / period
CCI = (TP - SMA) / (0.015 × Mean Deviation)

Key Characteristics

Property	Value
Default Period	20
Lambert Constant	0.015
Returns	Unbounded oscillator (typically -300 to +300)
Warmup Period	Equal to period
Input Data	OHLC bars (uses Typical Price)

Signal Interpretation

Primary Levels

Above +100: Strong uptrend, potentially overbought
Below -100: Strong downtrend, potentially oversold
Zero Line: Centerline crossover indicates trend change

Trading Strategies

Trend Identification: Values consistently above/below zero indicate trend direction
Overbought/Oversold: Extreme readings (+200/-200) suggest reversal potential
Divergence: Price making new high/low while CCI fails to confirm
Zero-Line Cross: Bullish when crossing above, bearish when crossing below

Lambert Constant (0.015)

The 0.015 constant was chosen by Lambert to ensure that approximately 70-80% of CCI values fall between +100 and -100 under normal market conditions. This provides a statistical framework where:

Values outside ±100 indicate significant price movement
Extended readings suggest strong trends
Extreme values (±200 or beyond) are relatively rare

Usage

Basic Construction

// Create CCI with default 20-period
var cci = new Cci();

// Create CCI with custom period
var cci = new Cci(14);

Streaming Updates

foreach (var bar in realTimeData)
{
    TValue result = cci.Update(bar);
    double cciValue = result.Value;
    
    if (cciValue > 100)
        Console.WriteLine("Overbought territory");
    else if (cciValue < -100)
        Console.WriteLine("Oversold territory");
}

Batch Processing

TSeries results = Cci.Batch(barSeries, period: 20);

Comparison with Other Oscillators

Indicator	Bounds	Best For
CCI	Unbounded	Trend strength, divergence
RSI	0-100	Overbought/oversold levels
Stochastic	0-100	Price position within range

Historical Context

Developed by Donald Lambert (1980)
Originally published in Commodities magazine
Early application for identifying cyclical trends in commodities
Now widely used across all asset classes

References

Lambert, D.R. (1980). "Commodity Channel Index: Tool for Trading Cyclic Trends"
TradingView CCI Documentation
Investopedia CCI Guide

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