All you need to know about Commodity Channel Index in trading

The basic philosophy of CCI is based on the assumption that commodities, stocks and bonds trade in a cycle with a peak and a trough arrived at on a periodic basis.

The Commodity Channel Index (CCI) was developed to identify cyclical trends in commodities. Over the years, though, the CCI indicator has been successfully used in gauging the outlook of other instruments like securities and bonds. The focus of CCI is to determine the reversal levels and identify the overbought and oversold conditions.

 

The CCI compares the current price to the simple moving average over a given period of time, which is reflected