# CCI Divergence Indicator Guide for MT4/MT5

CCI divergence MT5 indicator is a MetaTrader CCI (Commodity Channel Index) divergence detector. This popular chart oscillator is useful in trading reversals of all financial instruments and not just in the commodity market. It was developed by American Donald Lambert in the early 80s. The CCI divergence detector indicator for MT4 is used to measure the current price of the asset against an average price over a period of time. Besides, this technical is a type of flexible indicator that can be used to determine whether the financial asset is overbought or oversold. For traders who trade for the long term, this helps them determine when a trend is likely to reverse. This is mainly done through CCI divergence detection by the indicator in Tradingview charts.

## What is CCI divergence ?

CCI divergence recognizes the divergence between price activity and the commodity channel oscillator. Also, the CCI divergence indicator is a popular trading strategy that is useful in all markets (not just commodities). To explain, divergence detection reveals possible turning points, considered as excellent entry points for FX traders, in the forex exchange.
Divergence notices are visually hard to identify. Fortunately, the indicator automatically notices and plots CCI divergences in MT4 FX charts. Consequently, divergence traders may easily utilize the indicator in their trading process to detect price reverses.

## Indicator Formula

To compute the CCI divergence, we should follow these steps:
CCI = TP – SMA /0,015 × Mean deviation
where :

• TP: typical price also called average price = (high+low+close)/3.
• SMA: Simple Moving Average= sum of typical prices/N.
• N: the number of periods.

There are 3 steps to calculate the mean deviation:

1. Substruct the most recent n-period average of the typical price from each period’s typical price. : A= TP-SMA(TP,N). Where: SMA(TP,N)= SUM(TP,N)/N.
2. Take the absolute values of numbers just found before, then sum them: SUM(A, N).
3. Divide it by the total number of periods (N).: SMA(A, N)= SUM(A, N)/N.

Certainly, to draw a CCI divergence indicator on a chart in the MetaTrader platforms or Tradingview, you don’t need to know all this. But to understand more precisely what this indicator shows, it is necessary to understand how it is computed.

## How do you use it ?

The main objective of the indicator resides in identifying divergence points. To do so, the indicator compares price activity on the chart and pivot values of the CCI divergence tool. To explain, it links peaks and troughs from the chart and the oscillator indicator to identify hidden CCI divergence signals. Bullish CCI divergence is hidden when the oscillator prints lower lows but the price prints higher lows on the chart. Alike, bearish CCI divergence forms when the oscillator marks higher highs but the price chart marks lower highs. Finally, the technical tool draws the divergence in the form of lines so that traders can visualize the price divergence from the CCI oscillator. Also, it provides them with arrow signals as high-probability entry points in forex trading. To clarify, the blue arrow pinpoints a bullish divergence signal. While the red arrow pinpoints a bearish divergence signal.

### Bullish Chart Example (USD/CAD H4)

Traders have better initiate buy trades once the CCI divergence indicator displays a blue arrow on the price chart.
The following US dollar and Canadian dollar figure displays perfect bullish divergence point. Hence, blue arrows represent a likely reversal toward an uptrend. This also indicates that buyers are getting stronger.

### Bearish Chart Example (EUR/GBP Daily)

Traders have better start sell positions once the CCI divergence indicator depicts a red arrow on the price chart.
The following EURO and Pound Sterling figure displays excellent bearish divergence pivots. Hence, red arrows represent a probable reversal toward a downtrend. This also indicates that sellers are getting stronger.

CCI Divergence indicator MT4 shows price divergence signals between the price evolution and the MetaTrader 4 technical indicator. This divergence trading indicator is useful to identify early market reversals over all time periods. Before making any decision to trade, always validate CCI divergence trades with other technical tools.

Looking to the chart above. A blue CCI divergence on the chart indicates that a bullish divergence has occurred between price and CCI. While a red CCI divergence on the chart indicates that a bearish divergence has occurred between price and CCI.