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Measuring price deviation from statistical mean.
The Commodity Channel Index (CCI) measures how far price has deviated from its statistical mean. Developed by Donald Lambert in 1980, it oscillates without fixed boundaries — readings above +100 indicate unusual strength, below -100 indicate unusual weakness.
Key insight: CCI treats price as having a natural equilibrium. Large positive readings don't just mean overbought — they mean price has moved significantly above what's statistically normal. This makes CCI excellent for identifying when a trend is truly accelerating vs. when it's overextended.
The unbounded nature of CCI is its unique advantage. While RSI caps at 100, CCI can reach +300 or beyond in parabolic moves, giving you a clearer picture of trend intensity.
Zero-line crossover: CCI crossing above zero suggests bullish momentum building. Crossing below zero suggests bearish momentum. Simple but effective for trend direction.
Overbought/oversold extremes: Readings beyond +200 or -200 indicate extreme conditions. In ranging markets, these can signal reversals. In trending markets, they signal strength.
Divergence: When price makes a new high but CCI makes a lower high, momentum is weakening. CCI divergences are particularly reliable because of its sensitivity to price deviation.
This indicator works best when combined with price action analysis. Never trade indicators alone - always confirm with the chart.
Indicators confirm what price action shows. They don't replace it. Never trade based on an indicator signal alone. Always combine with chart structure, pattern recognition, and volume analysis.
The Academy teaches when to use this indicator, when to ignore it, and how to combine it for high-probability setups.
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