The Commodity Channel Index (CCI) is best used with markets that display cyclical or seasonal characteristics, and is formulated to detect the beginning and ending of these cycles by incorporating a moving average together with a divisor that reflects both possible and actual trading ranges. The final index measures the deviation from normal, which indicates major changes in market trend.
To put it simply, the Commodity Channel Index (CCI) value shows how the instrument is trading relative to its mean (average) price. When the CCI value is high, it means that the prices are high compared to the average price; when the CCI value is down, it means that the prices are low compared to the average price. The CCI value usually does not fall outside the -300 to 300 range and, in fact, is usually in the -100 to 100 range.
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