Commodity Channel Index (CCI) is an oscillator indicator which accurately identifies overbought or oversold levels. It was developed by Donald Lambert in 1980, and was originally supposed to be used exclusively for commodities trading, but later it found its application in Stocks and Futures as well.  CCI compares current price to the average price for a given time period. If the current price is greater than the average price CCI indicates Overbought condition, while if the current price is less than average price CCI indicates Oversold condition.  CCI value oscillates between two extremes, hence its is particularly useful for Mean reversion Trading systems. However CCI divergence can be used to identify trends too. In this post we’ll go through a very simple CCI Trading System. The results of this system is quite impressive and consistent when backtested on Daily timeframe.

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CCI Trading System – AFL Overview

Parameter	Value
Preferred Time-frame	Daily
Indicators Used	CCI (Commodity Channel Index)
Buy Condition	CCI(10) crosses zero line from bottom CCI(10) > CCI(30)
Short Condition	CCI(10) crosses zero line from top CCI(10) < CCI(30)
Sell Condition	Same as Short Stop Loss Hit Target met
Cover Condition	Same as Buy Stop Loss Hit Target met
Stop Loss	2%
Targets	5%
Position Size	150 (fixed)
Initial Equity	200000
Brokerage	100 per order
Margin	10%

CCI Trading System– AFL Code

//------------------------------------------------------
//
//  Formula Name:    CCI Trading system
//  Author/Uploader: Trading Tuitions
//  E-mail:          support@tradingtuitions.com
//  Website:         www.tradingtuitions.com
//------------------------------------------------------

_SECTION_BEGIN("CCI Trading System");

SetBarsRequired( sbrAll );
SetChartOptions(0,chartShowArrows|chartShowDates);
_N(Title = StrFormat("{{NAME}} – {{INTERVAL}} {{DATE}} Open %g, Hi %g, Lo %g, Close %g (%.1f%%) {{VALUES}}", O, H, L, C, SelectedValue( ROC( C, 1 ) ) ));

//Initial Parameters
SetTradeDelays( 1,1,1, 1 );
SetOption( "InitialEquity", 200000);
SetOption("FuturesMode" ,True);
SetOption("MinShares",1);
SetOption("CommissionMode",2);
SetOption("CommissionAmount",100);
SetOption("AccountMargin",10);
SetOption("RefreshWhenCompleted",True);
SetPositionSize(150,spsShares);
SetOption( "AllowPositionShrinking", True );

Plot( Close, "Price",colorWhite, styleCandle );

CCISlow=Param("CCISlow",30,30,100,10);
CCIFast=Param("CCIFast",10,5,30,5);
 
Buy = Cross( CCI(CCIFast), 0 ) AND CCI(CCIFast) > CCI(CCISlow) ;
 
Short = Cross( 0,CCI(CCIFast)) AND CCI(CCIFast) < CCI(CCISlow);

Sell=Short;
Cover=Buy; 

BuyPrice=Open;
SellPrice=Open;
ShortPrice=Open;
CoverPrice=Open;

Buy = ExRem(Buy,Sell);
Sell = ExRem(Sell,Buy);
Short=ExRem(Short,Cover);
Cover=ExRem(Cover,Short);

printf("\nBuy : " + Buy );  
printf("\nSell : " + Sell );  
printf("\nShort : " + Short );  
printf("\nCover : " + Cover );  

StopLoss=Param("SL",2,1,10,1);
Target=Param("Target",5,5,40,5);
ApplyStop(Type=0,Mode=1,Amount=StopLoss);
ApplyStop(Type=1,Mode=1,Amount=Target);
 
PlotShapes(IIf(Buy, shapeSquare, shapeNone),colorGreen, 0, L, Offset=-40);
PlotShapes(IIf(Buy, shapeSquare, shapeNone),colorLime, 0,L, Offset=-50);
PlotShapes(IIf(Buy, shapeUpArrow, shapeNone),colorWhite, 0,L, Offset=-45);
PlotShapes(IIf(Cover, shapeSquare, shapeNone),colorGreen, 0, L, Offset=-40);
PlotShapes(IIf(Cover, shapeSquare, shapeNone),colorLime, 0,L, Offset=-50);
PlotShapes(IIf(Cover, shapeUpArrow, shapeNone),colorWhite, 0,L, Offset=-45);
PlotShapes(IIf(Sell, shapeSquare, shapeNone),colorRed, 0, H, Offset=40);
PlotShapes(IIf(Sell, shapeSquare, shapeNone),colorOrange, 0,H, Offset=50);
PlotShapes(IIf(Sell, shapeDownArrow, shapeNone),colorWhite, 0,H, Offset=-45);
PlotShapes(IIf(Short, shapeSquare, shapeNone),colorRed, 0, H, Offset=40);
PlotShapes(IIf(Short, shapeSquare, shapeNone),colorOrange, 0,H, Offset=50);
PlotShapes(IIf(Short, shapeDownArrow, shapeNone),colorWhite, 0,H, Offset=-45);

_SECTION_END();

AFL Screenshot

CCI Trading System- Backtest Report

CCI Trading system is consistent and its moderate drawdown should be ok for mild aggressive traders. 20% CAGR over last 6 years looks good for long term capital growth.

Parameter	Value
	Nifty
Initial Capital	200000
Final Capital	772617.80
Scrip Name	NSE Nifty
Backtest Period	01-Jan-2010 to 24-Apr-2017
Timeframe	Daily
Net Profit %	286.31%
Annual Return %	20.32%
Number of Trades	99
Winning Trade %	42.42%
Average holding Period	7.88 periods
Max consecutive losses	6
Max system % drawdown	-27.43%
Max Trade % drawdown	-37.62%

Download the detailed backtest report here.

Equity Curve

The equity curve smoother than most of the trading system we have posted. Periods of mild drawdown are inevitable for any system.

Profit Table

Additional Amibroker settings for backtesting

Goto Symbol–>Information, and specify the lot size and margin requirement. The below screenshot shows lot size of 75 and margin requirement of 10% for NSE Nifty:

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