Commodity Channel Index (CCI) Forex Strategy

The Commodity Channel Index (CCI) forex strategy tends to help traders spot new trends as they occur in the market and spot new ones or in most cases alert when we are facing extreme conditions in the market.

This strategy can be used on both currency and equities market.

The strategy combines the CCI_Histogram.ex4 MT4 indicator and the Bands custom indicator in the analysis of signals.

Chart Setup

MetaTrader4 Indicators: CCI_Histogram.ex4 (default setting), Bands.ex4 (default setting)

Preferred Time Frame(s): 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day, 1-Week

Recommended Trading Sessions: Any

Currency Pairs: Any pair

Download

Download the Commodity Channel Index (CCI) Forex Strategy

Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

Enter a buy position if the following indicator or chart patterns are in display:

  1. If the maroon colored line of the CCI_Histogram.ex4 custom indicator breaks above the 0.00 level, with grey and RoyalBlue bars forming above the 0.00 level, then we can place a buy order in the market. The grey and RoyalBlue bars are bordered by the maroon colored line.
  2. If the Bands custom indicator squeezes and price breaks out onto the outer upper band as shown on Fig. 1.0, price is said to be bullish i.e. a buy order trigger.

Stop Loss for Buy Entry: Place stop loss 1 pip below the lower band.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit on position(s) if the following rules or conditions hold sway:

  1. If price opens and closes below the middle band of the Bands custom indicator, it is a signal to exit on position(s) or take profits.
  2. If the maroon colored line of the Bands MT4 indicator breaks below the 0.00 level, price is said to be reversing from its current trend, as such an exit or take profit is advised.

Sell Entry Rules

Enter a sell in the market if the following conditions or rules hold:

  1. If the maroon colored line of the CCI_Histogram.ex4 custom indicator breaks below the 0.00 level, with grey and red bars forming below the 0.00 level, then it is indicative of a sell trigger i.e. a bearish trend. The maroon colored line borders the grey and red color bars.
  2. If the Bands custom indicator squeezes and price breaks out onto the outer lower band as depicted on Fig. 1.1, it is a signal that price is pressured to the down side, as such a sell is appropriate.

Stop Loss for Sell Entry: Place stop loss 1 pip above the upper band.

Exit Strategy/Take Profit for Sell Entry:

Exit or take profit on position if the following chart of indicator patterns are in display:

  1. If the maroon colored line of the CCI_Histogram.ex4 eventually breaks above the 0.00 level, it is a trigger to exit or take profit accordingly.
  2. If a price bar opens and closes above the middle line of the Bands custom indicator, it is a trigger to exit or take profit.

Fig. 1.1

Free Download

Download the Commodity Channel Index (CCI) Forex Strategy

About The Trading Indicators

The CCI_Histogram.ex4 indicator is one of the variant of the Commodity Channel Index (CCI) that gauges the current price level in relation to a mean price level over a specified time period.

The Bands indicator is a typical Bollinger Bands indicator and it measures price volatility, offering traders insight into possible breakouts in the market.

When the bands contracts, it signals that price is ranging and is getting ready for a breakout.

The widening of the bands is breakout trigger and traders can trade to the upside when price breakout occurs on the upper outer band and reverse is the case when price breaks out to the lower outer band.

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