CCI is a very popular indicator. You can use it in long-term, swing term or swing trading. It also works great in scalping joined with other indicators or by itself.
First, few words about parameters. Default period for CCI would be 21 or similar. I recommend trying longer periods like 50, 100 or 200. With longer periods you get fewer signals, but they are more accurate. It is up to you if you prefer to have faster, but less accurate signals or a little bit slower but more accurate. In my trading, I usually go with 100 and 200.
We change periods in the options window. You can see that below we can change the type of calculation. There are standard options like Close, but you can play with it. I usually go with Typical Price or Weighted Close. There is a difference so check each option and select the best one for you.
There are many ways to use signals from CCI. The most popular are crosses with 0 and 100 line.
For example, when a price is below 0 line and it crosses it then it is a good place to go long.You can see that is not that often for CCI to cross 0 line, that is why this is an important signal.
Another good entry point is a cross with 100 line. Price managed to go far away from 100 average (if you set your CCI for 100) and it is a good indication that move is strong.
As always, you can also draw trendlines on CCI, which can help you to decide when to enter a trade:
About levels on CCI. Basic ones are 0, 100, -100, but you can (and should) use next levels. As a minimum I recommend -200, -100, 0, 100, 200, but you will see in next examples that you can go with even bigger levels.
There are many ways you can use information from CCI to open and close a trade. Let’s take a look at some of them.
One way is to open a trade after cross with 0 line and close when CCI crosses back with 200 line (or 100 if trend is weaker):
On the example above we saw one false signal (first cross with 200). Still, you could close it with profit, re-enter and close after another cross with 200.
Another way is to open at 100 crosses. When a trend is strong then most of the time CCI will be above 0 line (when we talk about an uptrend). In that case cross with 100 line would be a good entry point. If a move is not that strong then we want to close at cross back with 200 line. Sometimes move will be very strong and CCI can help us to close trade near the pick – after cross back with 300 or 400 line. Yes, it is rare, but when you see cross back with 400 or -400 line then in most cases this is the best place to close a trade and keep most of the profits for yourself. Like in the example below:
Another way is to use CCI to open trades in oversold and overbought regions. We hunt here for crosses at extreme moves. In most cases, this will be at -200 and 200 lines. We can book profit on the other 200 line or earlier, depends on our trading plan. These 200 lines are good places to catch moves almost at their beginnings:
That is not over. We can go with 100 – 100 or 200 – 200 open-close approaches. The goal here is to catch trending moves. We open a trade after a cross with 100 CCI. When there is a cross back then we close it. Sometimes it will be a false signal, but with trends, it works very well. On the example below you can see that we also had another confirmation to close from Bollinger Bands:
In most examples above I used CCI with 200. Based on price history on a current time frame, try to check which settings will work best for you.
Basic info about day trading:
- Forex scalping and day trading for beginners
- Best Forex broker, fx pairs, trading hours for scalping and day trading
- Day trading Bitcoin
- Forex scalping and day trading without indicators
- Time frames in day trading
- Trading desk
Management in day trading:
Indicators in day trading
- Forex ATR – trailing stop loss
- Forex Parabolic SAR
- Moving averages
- Bollinger bands
- Fibonacci retracement
- Support and resistance, Pivot Points