There are several steps involved in calculating the . The following example is for a typical 14 Period CCI:
CCI = (Typical Price - 14 Period of TP) / (.015 x Mean Deviation)
Typical Price (TP) = (High + Low + Close)/3
Constant = .015
The Constant is set at .015 for scaling purposes. By including the constant, the majority of values will fall within the 100 to -100 range.
1) Subtract the most recent 14 Period Simple Moving from each typical price (TP) for the Period.
2) Sum these numbers strictly using absolute values.
3) Divide the value generated in step 2 by the total number of Periods (14 in this case).
Overbought and Oversold conditions can be used in their more traditional sense to identify future reversals. Remember true overbought/oversold thresholds values can and often do vary between instruments.
During a Bullish Trend, price crossing above the overbought threshold may indicate strong confidence in the move and price will continue to rise.
During a Bearish Trend, price crossing below the oversold threshold may indicate strong confidence in the move and price will continue to fall.
The first option is a modified indicator that uses the "Arnaud Legoux Moving Average" instead of the , and the source uses the instead of the HLC3. Added to this version an option to calculate with different types of moving averages:
Green dots mean they are overbought
Orange dots mean they are oversold
Added a "SuperTrend Background" based on the modified indicator:
Bull event = crossing over the 0 line
Bear event = crossing below the 0 line
Added a signal as (modified , signal length)
The second option is a standard indicator that shows a coloured histogram of important levels, giving a good visual of the levels. Added to this version is an extra coloured level +/-200 and an option to use Traditional calculations according to user @JustUncleL
Aqua: Greater than 200.
Lavender: Greater than 100 and less than 200.
Dark Lavender: Greater than 0 and less than 100.
Dark Coral: Less than 0 and greater than -100.
Coral: Less than -100 and greater than -200.
Light Red: Less than -200.
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.