So to help put the odds in our favor, we are going to look to price action trading to help lessen the lagging issue with all indicators. All markets move in cycles, so we recommend using the CCI indicator in combination with higher time frames as this will yield better trading performance according to our backtesting results. These will give you an objective location to begin looking for a trading setup. He has over 18 years of day trading experience in both the U. Oscillators tend to have levels that indicates overbought or oversold. On the other hand, if you are shorting the stock, you should look for a top near your entry price. The second trade took about 40 minutes.
My Favourite Trading Strategy. Commodity Channel Index •Donald Lambert •Identify new trends or warns of volatility •Developed to identify cyclical turns in commodities •CCI measures a current price level vs. an average level over time •CCI is high when price is above average.
What is the Commodity Channel Indicator (CCI) indicator?
However, it tends to perform the same in the stock market or the Forex currency market and even the cryptocurrency market for that matter. The CCI indicator strategy was really designed to find cyclical trends in the market and to be used as a bearish or bullish filter.
You have to keep in mind that technical indicators are just mathematical equations. Here is an approach to currencies by Warren Buffett. In other words, the dominant market energy is to the upside.
Now, before we go any further, we always recommend taking a piece of paper and a pen and note down the rules of this entry method. Also, read trading discipline which is also a most important skill for successful trading.
As a leading indicator, the Commodity Channel indicator can provide us with excellent great trade signals. Waiting for a pullback in price is a more defensive trading approach. We either buy after we have seen the market pulling back over the last candles or we buy straight away if we have sharp corrections. If the retrace was weak, it means the dominant energy of the market remains up.
The CCI indicator strategy reflects quite well what is happening behind the scene where the actual buying and selling pressure takes place. This brings us to the next important thing that we need to establish for the CCI trading strategy, which is where to place our protective stop loss. Simply place your protective stop loss below the most recent swing low. Last but not least, we also need to define where we take profits when trading with the Commodity Channel Index indicator. However, since the market will only occasionally give us such big trading opportunities we need to have a backup plan.
As soon as the CCI indicator turns below the zero level, we want to exit our trade. The first sign that the rally is running out of steam is when the CCI indicator crosses below the zero line.
Use the same rules for a SELL trade — but in reverse. It never hurts to have an understanding of how the CCI is calculated to help you fully understand the nuances of this trading indicator. Keep in mind that some traders may alter how the typical price is calculated but for now, just focus on the accepted calculation.
The use of a. What that means that if the Commodity Channel Index heads into the oversold or overbought condition, that is outside the normal fluctuations of a market.
That indicates strength or weakness and is a good time to either place a trade or exit one you are currently in.
To summarize so far: It the CCI reads overbought or oversold then this tells you that the price has exceeded the normal price movement the standard deviation away from the average. If you were to follow the trading signals generated by CCI, without any other technical analysis or price action study, then these are the problems you will encounter as shown by the chart below:.
So can we tie all the good things about the CCI into something that we can actually trade as a Forex strategy? The logic for this is very simple: The CCI cannot tell you about the trend but can tell you about the strength of the trend. So to help put the odds in our favor, we are going to look to price action trading to help lessen the lagging issue with all indicators. You first should fully understand how to draw support and resistance levels on your chart.
These will give you an objective location to begin looking for a trading setup. It is also a good idea to confirm these with bearish reversal candlestick patterns to go short when trading the bounce of a resistance level like shown on the chart below:.
Mail will not be published required. Here is how Lambert explained that figure:
How the Pro’s Trade Using the CCI Trading System
May 23, · Note** the above was an example of a BUY trade using our CCI trading strategy PDF. Use the same rules for a SELL trade – but in reverse. In the figure below, you can see an actual SELL trade example/5(5). Trading The Commodity Channel Index suits momentum strategies. Here are 2 CCI trading strategies you can use and learn how to use it for trading. CCI 50 Strategy Trading System. CCI 50 Strategy Trading System Free Forex Strategies, Forex indicators, forex resources and free forex forecast # Easy 15min Trading System; # CCI 50 Strategy; # Synergy Modified; # ZIG ZAG Parabolic and Rsioma Strategy; using the speproin.tk Adobe Acrobat Document .