Commodity Channel Index Indicator MT4 | MT5

The CCI Indicator is defined as a momentum-based oscillator, developed by Donald Lambert, that helps recognize cyclical trends in price movements and detect any oversold and overbought market conditions to pinpoint any reversal opportunities.

Furthermore, this indicator displays a line that fluctuates above and below a zero line, bounded by +100 and -100 levels. If the CCI line moves above the +100, it indicates an overbought condition, while a drop below the -100 level signifies an oversold condition.  

To help traders understand how this indicator works, its formula is provided below: 

• CCI = [Typical Price – SMA (Typical Price)] / [0.015 * Mean Deviation]

Where: 

• Typical Price = (Close+High+Low) / 3
• SMA = Simple Moving Average of the Typical Price over a selected period

Mean Deviation = [ ∑|TP-SMA| ] / n

0.015 + Constant to normalize CCI values (can be adjusted based on user preferences)

For the trading example on metatrader 4, the CCI remains below the balance point for the majority of the downtrend, indicating the trend’s strength. When the trend reaches the end, the CCI enters the oversold zone, signaling a strong reversal opportunity, and the trend shifts to an uptrend.

For the trading example on metatrader 5, the CCI stays above the 0 level for most of the uptrend, highlighting the trend’s strength. As the trend nears its end, the CCI reaches the overbought zone, signaling a strong reversal opportunity, and the trend transits to an uptrend.

To enhance decision-making with the CCI, it is recommended that traders combine it with other tools, such as support and resistance levels, and use it alongside indicators like RSI or Stochastic Indicators for additional confirmation.