Exit strategy #6 (Tight stop timing with CCI)

Hi,
Though many of you appreciate the strategy, I am not clear about it. According to my understanding we buy/sell when a new SAR signal appears , then check for the CCI. What we have to do after CCI touches 100/-100, we should close the trade?

No, we shouldn't close the trade immediately, that's the point of it: we want to squeeze out every possible pip from this trade, so we: start chasing place candle-by-candle by placing a stop below the last closed candle.
This is done until we get stopped out.

Regards,
Edward

OK, I coded this in TradeStation EasyLanguage and backtested it over 1 year of EURUSD. I tried two different CCI entry methods, one where entry is triggered when CCI crosses Overbought and Oversold. I also tried a Fast/Slow CCI crossover entry. I used Parabolic SAR as the standard exit. Then I added the CCI triggered exit described by ctlprogrammer.

I generally optimize my strategies to produce the best Van Tharp expectancy, rather than the highest net profit. That gives better prediction of real trading results. I also write my code in such a way that I can optimize input parameters separately for entering and exiting trades long or short. Therefore, I usually end up with at least 4 different sets of input parameters:
1) Long entry parameters
2) Short entry parameters
3) Long exit parameters
4) Short exit parameters

I test with a starting account balance of $5000.
All trades are limited to 50,000 units.
Commission is $2.77 for each side of the trade, $5.54 roundtrip.
Slippage is .00025
Start/End Date: 7/4/2010 - 7/6/2011
Chart Interval: 1 hour

In these tests, I found the following results:

1) CCI Overbought/Oversold entry with Parabolic SAR exit trigger:
Select Total Net Profit = $13,475
Select Profit Factor, All = 1.34

2) CCI Overbought/Oversold entry with Parabolic SAR exit trigger AND CCI triggered exit:
Select Total Net Profit = $ 15,717
Select Profit Factor, All = 1.41

3) CCI Crossover entry with Parabolic SAR exit trigger:
Select Total Net Profit = $ 9,789
Select Profit Factor, All = 1.22

4) CCI Crossover entry with Parabolic SAR exit trigger AND CCI triggered exit:
Select Total Net Profit = $11,555
Select Profit Factor, All = 1.27

My conclusion is that the exit strategy proposed by Edward increase profits about 16%.

Shown below is the EasyLanguage code for the long exit triggered by CCI.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
// Long exit. Initiate trailing stop when CCI crosses above overbought,
// using trailing stop target price of lowest low of x bars back as selling price.
// This stop price will trail upwards assuming price continues up, but it's a very tight stop.

inputs:
CCILength( 11 ),
CCIOverBought( 100 ),
SampleLength (5);

variables:
CCIValue( 0 ) ,
ExitOK ( 0 ),
LowestLo (0);

CCIValue = CCI( CCILength ) ;
LowestLo = Lowest(LOW,SampleLength);

if CCIValue crosses above CCIOverBought then begin
ExitOK=1;
end
else begin
ExitOK=0;
end;

if ExitOK=1 then
Sell ("CCI_Lx") all shares next bar at LowestLo stop;

// END OF PROGRAM
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The diligent programmer will see how to recode this strategy to handle exits from a short position.

Out of 397 trades,
242 were exited by the Parallel SAR exit trigger.
44 were exited by the CCI triggered close trailing stop.
111 were exited by buy or sell signals in the opposite direction.

Careful readers will realize that Edward did not describe any entry strategy. He is just suggesting that his CCI triggered trailing stop loss can be used to exit any trade. I've backtested his exit routine on trade strategies that use CCI entries, Moving Average entries, and Bollinger Band entries. His CCI triggered stop loss can improve profits on all of these that I have tested.

Traders should learn to experiment constantly with exit strategies, and it's OK to employ several exit strategies in parallel. If you are a TradeStation user and can write programs, you should become familiar with the "Exit Efficiency" chart found in the strategy performance report.

Wonderful job!
Thank you for the detailed informative report and commentaries. It was very interesting to study, and we have nice results!

Kind regards,
Edward

hi thanks for u r information can i use it on 5 min time frame

Nice Team work. Wish u all the best.

Best Regards,

Rams