Posts Tagged ‘cci’

Hello all,

From time to time, I will be posting some a system that other coaches may have developed, heard of, or even tested. I want you to take the opportunity and test it yourself and see how it works on a particular pair of your choosing. As a word of caution, I want to point out that there is no guarantee that this particular system works in this type of trading environment but this system may give you an idea on how to set up a system of your own.

Some of you may have seen this system before or it may be new, I would suggest you read it, test it and re-test it and make it your own system. That way you will own it at that point and understand it. I ask one thing, post your findings in the comments section and share with others what you find. That way, others can learn from your findings. Have fun!!!

~ G

CCI and Simple Moving Average (50) System

The Commodity Channel Index (CCI) and Simple Moving Average (SMA) trading system is a simple approach to trading the currency market. The CCI is used to determine the entry point into a trade, while the SMA is used to filter the signals. The management of risk is accomplished by using a 100 pip stop loss. Winning trades are exited with a 100 pip profit.

The system employs a bracket approach to exiting winning and losing trades. Both the profit target and stop loss are 100 pips away from the entry point, which means that the system must achieve a high win/loss ratio in order to be profitable. The following table displays the rules of the system:

Timeframe: Daily Chart

Indicators: CCI (14); SMA (50)

Enter Long: When CCI crosses above -100 and SMA is greater than or equal to yesterday’s SMA value.

Enter Short: When CCI crosses below +100 and SMA is less than or equal to yesterday’s SMA value.

Exit Point: Set profit target of 100 pips.

Stop-loss: Set stop of 100 pips after entry.


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gbpjpy2.jpg Now that the pair trounced the bulls with a bone-crunching thud, what next? After a nice consolidation that looked pretty flag-like (on a short term timescale), it broke lower some more overnight. It fell a few hundred more pips (!) and has now retraced back up to where it broke out from.

Looked at on an hourly timescale, I’d expect this to retest former support of the flag, as resistance now, and then fall some more. On the chart here (click to enlarge), I threw a CCI on to illustrate the “reject the zero” principle for the CCI, by the way. Notice how when it fell overnight, it fell coming off of hitting the zero CCI line, as if that was resistance. Sometimes the zero acts like support/resistance, hence “reject the zero”. It’s now at the zero again, and the CCI is decelerating. Being at actual resistance in price, it would be unsurprising if it didn’t bounce lower sometime soon.

The awesome thing about going against the carry, or shorting this pair and paying interest, is the ferocity of the down-moves. When the GBP/JPY heads south, it hustles doubletime.

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