Constructing the Commodity Channel Index from typical price and scaled deviation

A price-momentum reading from typical price

The Commodity Channel Index is assembled as a price-momentum reading that compares a security's price with its statistical mean over a chosen lookback. Daily typical price is the average of high, low, and close, and that series is the first input in an 11-period Commodity Channel Index worksheet.

Moving mean and scaled mean deviation

The 11-period construction next takes a simple moving average of typical price, then a mean deviation from that average using the absolute differences of the last 11 typical prices. The index value is the ratio of today's typical price minus today's moving average to today's mean deviation multiplied by the constant 0.015.

Conventional and oscillator-style thresholds

The conventional recipe treats the plus-or-minus 100 band as the range of random fluctuation and uses a rise through +100 as a long-entry threshold, with an exit when the reading falls back below +100. An oscillator-style alternative replaces the plus-or-minus 100 pair with crossings such as long above 30 and short below 70, and a long-side optimization on a sample used a cross above 40.

Lookback is not a fixed period

Lookback is not fixed: any period may be chosen, and a 24-period series was used on a 2002 primary-cycle chart where zero, not plus-or-minus 100, marked the turning point. On that 24-period series, cycle starts aligned with bottoms below 200 and cycle tops with peaks above 150, so +100 sat in the mid-run or late phase of the advance.

Subcycles and price-indicator divergence

The same 24-period construction also traced primary-cycle subdivisions, and price-indicator divergence appeared on the second subcycle of the illustrated index series. Similar cycle-aligned structure on the same 2002 primary cycle was observed when the construction was applied to more than one index series. Editorial reading: price-indicator divergence is only a testable chart condition after the lookback and scale are fixed. It is not a property the Commodity Channel Index supplies on its own.