The Commodity Channel Index (CCI) is a momentum-based oscillator used to help determine when an investment vehicle is reaching a condition of being overbought or oversold
Developed by Donald Lambert, this technical indicator assesses price trend direction and strength, allowing traders to determine if they want to enter or exit a trade, refrain from taking a trade, or add to an existing position. In this way, the indicator can be used to provide trade signals when it acts in a certain way.
KEY TAKEAWAYS
The Commodity Channel Index (CCI) is a technical indicator that measures the difference between the current price and the historical average price.
When the CCI is above zero, it indicates the price is above the historic average. Conversely, when the CCI is below zero, the price is below the historic average.
The CCI is an unbounded oscillator, meaning it can go higher or lower indefinitely. For this reason, overbought and oversold levels are typically determined for each individual asset by looking at historical extreme CCI levels where the price reversed from
This script calculates Commodity Channel Index (CCI) value and fills background of price action chart with colors:
Green zone indicates oversold zone where you can enter position
Red zone indicates overbought zone where a positions should be closed