The Commodity Channel Index (CCI) compares the current price level to the average price level over a given time period. When prices are significantly above their average, the CCI is relatively high. When prices are far below their average, the CCI is relatively low. CCI can be used to identify overbought and oversold levels using this method.

The Commodity Channel Index (CCI) is a versatile technical analysis indicator used to identify cyclical trends in financial markets, particularly in commodities. Developed by Donald Lambert in the 1980s, CCI measures the deviation of a financial instrument's price from its statistical average. This oscillator is calculated by subtracting the moving average of the price from the typical price and then dividing it by a constant multiple of the mean absolute deviation of the typical price. CCI oscillates around a baseline, typically set at ±100, with extreme values indicating overbought or oversold conditions. Traders utilize CCI to spot potential trend reversals, divergence between price and indicator, and to gauge the strength of price movements. Its versatility makes CCI a valuable tool for traders across various asset classes.