Commodity Channel Index (CCI)
Web3 / technical analysis
The Commodity Channel Index is a momentum oscillator that measures how far a security's price has deviated from its statistical mean value. CCI calculates the difference between the typical price (average of high, low, close) and a simple moving average, then normalizes this deviation by the mean absolute deviation. Values above +100 indicate overbought conditions suggesting potential reversals downward, while values below -100 indicate oversold conditions suggesting potential reversals upward. CCI oscillates around zero, making it useful for identifying cyclical price movements and mean reversion opportunities across different timeframes.
Example
Ethereum traders use CCI on hourly charts to spot when ETH price deviates extremely from its moving average; a CCI reading of +150 might trigger profit-taking for long positions while -150 might signal accumulation opportunities.
Why It Matters
CCI helps identify extreme price deviations and potential mean reversion trades in cryptocurrency markets, where price swings are often exaggerated, allowing traders to anticipate corrections and capitalize on overbought/oversold conditions.
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