# Commodity Channel Index CCI Forex Indicator

## Commodity Channel Index CCI Forex Indicator

Commodity Channel Index CCI Forex Indicator measures the deviation of the commodity price from its average statistical price.

High values of the index point out that the price is unusually high being compared with the average one, and low values show that the price is too low.

In spite of its name, the Commodity Channel Index can be applied for any financial instrument, and not only for the commodities.

There are two basic techniques of using Commodity Channel Index:

1. Finding the divergences
The divergence appears when the price reaches a new maximum, and Commodity Channel Index can not grow above the previous maximums. This classical divergence is normally followed by the price correction.
2. As an indicator of overbuying/overselling
Commodity Channel Index usually varies in the range of ±100. Values above +100 inform about overbuying state (and about a probability of correcting decay), and the values below 100 inform about the overselling state (and about a probability of correcting increase).

Calculation:

1. To find a Typical Price. You need to add the HIGH, the LOW, and the CLOSE prices of each bar and then divide the result by 3.TP = (HIGH + LOW +CLOSE)/3
2. To calculate the n-period Simple Moving Average of typical prices.SMA(TP, N) = SUM[TP, N]/N
3. To subtract the received SMA(TP, N) from Typical Prices.D = TP — SMA(TP, N)
4. To calculate the n-period Simple Moving Average of absolute D values.SMA(D, N) = SUM[D, N]/N
5. To multiply the received SMA(D, N) by 0,015.M = SMA(D, N) * 0,015
6. To divide M by DCCI = M/D

where:

• SMA — Simple Moving Average;
• N — number of periods, used for calculation.

Commodity Channel Index Technical Indicator (CCI) measures the deviation of the commodity price from its average statistical price. High values of the index point out that the price is unusually high being compared with the average one, and low values show that the price is too low. In spite of its name, the Commodity Channel Index can be applied for any financial instrument, and not only for the wares.

There are two basic techniques of using Commodity Channel Index:

1. Finding the divergences
The divergence appears when the price reaches a new maximum, and Commodity Channel Index can not grow above the previous maximums. This classical divergence is normally followed by the price correction.
2. As an indicator of overbuying/overselling
Commodity Channel Index usually varies in the range of ±100. Values above +100 inform about overbuying state (and about a probability of correcting decay), and the values below 100 inform about the overselling state (and about a probability of correcting increase).

## What does Forex Indicator mean?

A forex indicator is a statistical tool that currency traders use to make judgements about the direction of a currency pair’s price action. Forex indicators come in many types, including leading indicators, lagging indicators, confirming indicators and so on. Popular forex indicators include moving averages, relative strength index (RSI) and average true range (ATR). A forex trader must choose the indicators that fit his or her trading strategy.