Forex trading strategy #46 (Balaz's simple CCI trading system)
Submitted by User on August 3, 2011 - 10:55.
Submitted by Balázs J.
I'm using the well-known CCI strategy with some small extensions, mainly on 1H EUR/USD and 1H USD/CHF with one CCI(20) and a CCI(72):
When CCI(20) crosses or even hits +/-100 at the close of the 1H candle, I go for Long/Short.
Basically you should close the position if it hits the +/-200 but when the CCI(72) is still on the opposite side of the 0-line, don't wait for the 200 hit, just watch and close it when it breaks out. It can still hit 200 but I think it's statisticaly better to wait for larger profits and let the position hit 200 mostly when the CCI(72) confirms the CCI(20)'s signal by at least being on the same side of it's 0-line. Example: if CCI(20) hits +100 and CCI(72) is above 0, then there's a good chance that it'll be a longer run, not just a breakout. Chances even better if CCI(72) also hits +/-100 or already above it.
An extra rule:
If CCI(20) jumps instantly above or under +/-200 from the -100 to +100 range with a greater breakout then open as you'd have opened for the normal 100 crossing, just wait until price crosses the +/-200 again, then close... it happen to work.
When the CCI(20) doesn't confirm, then you can expect 20-30 before falling back to the -100>+100 zone... there is a chance it still going to hit 200 and produce a large breakout, it's up to you to take the risk in these situations.
False signals, losing trades:
There are of course... Sometimes price just hits the 100 on CCI(20) but it'll turn instantly or go up to about +10 pips but after that it just falls back to the general zone.
You have to close a position even if it's losing when the CCI(20) goes back to the -100>+100 zone at the close of the 1H candle.
Losing trades tend to hit a maximum of -40pips... extreme news triggered opposite side breakouts can hit -70pips... but a good profitable trade can hit +50, +150.
The strategy's weakness is ranging market. It still works just produce more losing trades however with small -3, -5 pips. If the ranging doesn't take long, you can trade and at the end, the breakout will probably give back the minuses.
Well, I think that is all I can tell about this strategy. Here's a screenshot about 1H EUR/USD with the yellow lines as profitable trades and the blue lines as losing trades.
I hope you'll have good experience with this and waiting if anyone finds more repeating patterns in it that will help us sort our trades.