The best signal offered by the cci indicator strategy will surprise you and works equally well if you’re day trading or swing trading stocks, Forex, futures or E-minis.
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Welcome to this tutorial on CCI Indicators strategy for winning trades. I am Barry Burns with Top Dog Trading, and let’s jump right into it.
One of my basic principles for trading is this, this is really really important, commit this to memory. In the direction of the dominant energy of the market. The market meaning whatever market I am trading. Whether its futures, whether its day trading, swing trading, stocks, forex, whatever. So that’s the key, now that’s a great principle but then the next question is, fine but how do we determine the dominant energy of the market. Okay, great question.
CCI INDICATOR BEST SETTINGS
I like to use a period of 20. Some people like to use a period of 14. I find that creates a choppier indicator and I don’t find it to be quite as easy to do trade. So I like 14, if you are using. I like 20, if you are using 14, that’s great. If it works for you, great, hey god bless you, and the horse you are riding on. I don’t complain if anybody’s making money with 14, then keep doing it. But I find personally that 20 is a setting that gives us better, less choppy signals.
Now here is the way that we are going to trade this. So back to looking at the direction of the dominant energy of the market. They are just mathematical equations. Right? So you’ve got 0, you’ve got a 100, you’ve got 200. And then below 0, you have -100 and -200. So the way you created the formula was intended that 70 to 80 percent of the CCI indicator strategy values would fall between 100 and 1-00. So what that means is that anything in there is just kind of an average range, nothing really special is going on.
Now number 2 is a lot of people look for those to be overbought, oversold signals, I don’t. The CCI is actually not a bounded indicator like some indicators like stochastics for example or RSI. So, but it’s rare that it gets too far above 200, or too far below negative 200. Even though it can, and it does from time to time. But here is what you have to understand. When we are below -100, that’s actually showing strength, in other words, dominant energy to the downside.
CCI INDICATOR STRATEGY
I am now looking for shorts. Especially here in this situation. The dominant trend is down. A long term trend is down, so I am only looking for shorts right now. And we’re early in a new trend. That’s the other thing how early or late are you in a trend. That’s very very important. So late in a trend, I might be looking for reversals but early in a trend, I am looking to trade with the trend.
We see early in a new trend here and we go down, CCI indicator strategy goes down below -100. That shows that statistically it’s got more strength than average. And therefore great, we’re showing strength to the downside. Still not ready to trade though. Because here is the key, now I want to look for the retrace. So the retrace, I want to be weak. I want strength to the downside if I am going to go short and I want weakness to the upside. Where do we go here, we go just a little bit above 0.
If we got above 100, now that’s a strong signal to the upside, I’d no longer be interested in going short. Because then we just had basically a weak bottom type of energy where we had very strong selling, followed immediately by strong buying. And that’s not what we want. What we want, in fact here is just a basic overarching principle, then we’ll show it to you on the CCI again, is I want the market to go down on strength, and what does that really look like, I mean what is really behind that.
CCI INDICATOR FOREX
What’s behind that is we have a lot of traders making a lot of trades, lot of trades coming through the market with velocity, speed if you are looking at your price action you would see it moving fast. If you are looking at time and sales window, you see those orders coming through fast, and we want big volume. Not just a lot of volume, but we want individual orders with large volume. So we got the big boys, we got the whales who are shorting.
Now the market oscillates, right. It goes down, then it pauses, then it goes down, retraces, goes down, retraces, so here is the key. Goes down on strength, now we got to watch the retrace, the retrace is the key. This is what a lot of people don’t understand. That retrace, that is your key. We want that to be coming up on weakness. So we don’t mind retraces, they are fine, they are the normal flow of the market, the respiration of the market if you will. Inhale, exhale, inhale, exhale, the markets do that, that’s natural, that’s normal.
CCI VS RSI
But when it comes back up a little bit, we want behind the scenes for that to be maybe, some people just take taking profits who have gone short or perhaps some retailers buying there who you know, they are just buying with their one lots or a hundred shares or whatever. Plus they are amateurs, they don’t know what they are doing, so they are probably going to be wrong. What we don’t want is to look over to time and sales and to see huge block trades buying. So down on strength, up on weakness, back down on strength. That’s what I basically mean by trading in the direction of the dominant energy of the market. Because if the retrace was weak, the dominant energy remains down.
That’s what happening on the chart and price action basically. That’s what happening behind the scenes with the actual buying and selling. Now we can map that with indicators. So today of course we are talking about the commodity channel index, the CCI indicator strategy. And so one of the ways we do that is we look for, okay first of all the dominant energy being down, getting below -100, retracing back to 0’s perfectly fine. A little bit above 0 is perfectly fine. Above 100, not so fine. Okay, not so fine.
WOODIES CCI METHOD INDICATOR
That little green line there, its 100, the number is not there but that’s what that is. And so we are showing more strength when we come back up, what happens, okay we get back up here to again, a little bit above 0, not quite to a 100, and then we go down to 200. We get down to 200, but here is the issue now. Now we are in a 5 wave trend. So, and this is an extreme reading too, negative to 100 is a very extreme reading.
Now again we are watching that retrace. Right, so okay we have got nice strong move up. We want a strong move up and we want a weak move down. Where do we go down? Well here is our zero line. The scaling kind of changed a little bit there. So just to show you, it doesn’t even get back down below the zero. In fact this whole time, it never gets back below 0, the black like there. And so therefore, just basically strong move up, weak move down, strong move up, weak move down, strong move up, weak move down, strong move up, weak move down, okay.
BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at Barry@TopDogTrading.com, and I’ll show you how to get access to that indicator.
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