Commodity channel index

Donald Lambert's commodity channel index measures how far typical price has moved from its own average, in units of mean deviation. Despite the name it is used on stocks, FX, and futures. Readings beyond +100 or -100 are the usual extremes. Traders either fade those extremes or wait for a hook back through the level.

Not investment advice. Nothing here is a recommendation to buy or sell anything. Backtests and historical studies are not guarantees, and a rule that worked in one sample can fail in the next. Trading can lose money. Links are for education, not endorsements. Do your own research.

Rules

The common length is 20. Typical price is the average of high, low, and close. CCI is the distance from a moving average of typical price, divided by a scaled mean deviation. A fade buys when CCI turns up from below -100 and exits near zero. A trend use buys when CCI crosses above +100 and exits when it falls back through that line. Pick one use per test.

Where AI fits

AI can keep the fade version and the breakout version in separate backtests so a mixed rule cannot take credit for both. It can also scale the 100 threshold by the asset's own CCI distribution. That scaling has to be fit on past data only.

Markets

Futures, FX, and liquid stocks. Lambert built it for commodities, but the formula is general.

Timeframes

Daily, and intraday if the length matches the session.

Risks

CCI can stay beyond 100 for a long trend, so a fade is a short against strength. The 100 line is a convention. Mean deviation is jumpy on thin bars. Using CCI and a Bollinger z-score as two signals double-counts distance from the mean.

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