# CCI Divergence Indicator Guideline

CCI divergence indicator The CCI (Commodity Channel Index) divergence indicator is a popular oscillator that is useful in all markets (not just commodities). It was developed by American Donald Lambert in the early 80s. The divergence indicator is used to measure the current price of the asset against an average price over a period of time. However, this indicator is a type of flexible indicator that can be used to determine if the asset is overbought or oversold. For traders who trade for the long term, this helps them determine when a trend is likely to reverse. It can also be useful to predict divergence.

## What is CCI divergence Strategy?

The CCI  divergence Strategy is a popular Strategy that is useful in all markets (not just commodities). It was developed by American Donald Lambert in the early 80s. The divergence Strategy is used to measure the current price of the asset against an average price over a period of time. However, this indicator is a type of flexible indicator that can be used to determine if the asset is overbought or oversold. For traders who trade for the long term, this helps them determine when a trend is likely to reverse. It can also be useful to predict divergence.

## How to calculate Divergence?

To compute the CCI divergence indicator, 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:
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.
• Take the absolute values of numbers just found before, then sum them: SUM(A,N).
• Divide it by the total number of periods (N).: SMA(A,N)= SUM(A,N)/N.

Certainly, to draw 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.

CCI Divergence indicator MT4 shows price divergence between the curve of price and the technical indicator CCI. This MT4 indicator is useful to identify market reversals over all time periods. To make a 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.

CCI divergence indicator for MT5 ( Metatrader 5) is used mainly to determine the divergence. This divergence is a sign of an impending trend moving in the opposite direction. Using the chart above, and consider the case where prices are falling. The CCI indicator MT5 enters the area below -100 and forms a local low there. We also have a floor on the price chart. The CCI then turns up above -100 to make another low and crosses the -100 line down again. This last bottom is higher than the previous one.

In the meantime, the price chart has made a downward move beating the previous minimum prices. So we have a bullish divergence. As soon as the CCI indicator crosses the -100 line upwards, we get an excellent buy signal from the CCI indicator. This signal is based on the identified divergence. 