Preferred Instrument - EURUSD
Preferred Timeframe - 4H & above
Backtest - No
Strategy owner - Loke4300
Risk reward ratio - 1:2;
Disclaimer - As with all other systems out there, the success or failure of a technique depends more on trader and his discipline. Try this technique on DEMO account before you decide to implement this on REAL account.
I wish to share one of my favorite methods of trading by using the CCI indicator. CCI indicator is best explained here. The system that i present here has NOT been taken from the internet or copied from someone;
Is this the holy grail?
Far from it. This is just another method of trading. The success or failure of which depends on YOU - the trader. Because YOU are a bundle of mixed emotions, conflicting thoughts and a confused state of mind while trading. If you could achieve DISCIPLINE, any system would work.
So, the strategy in brief:
Go LONG when CCI indicator has dipped twice below 100 level;
Go SHORT when CCI indicator has spiked twice above 100 level;
Further Addition 1:
Go LONG when CCI indicator has dipped twice below 100 level; AND has turned up;
Go SHORT when CCI indicator has spiked twice above 100 level; AND has turned down;
Further Addition 2:
Go LONG when CCI indicator has dipped twice below 100 level; AND has turned up; above the high of trigger candle.
Go SHORT when CCI indicator has spiked twice above 100 level; AND has turned down; below the low of trigger candle.
Trigger Candle is the candle where CCI managed to close above/below 100 after double dip.
Here's the 1000 words [Picture !] for LONG trade:
The exact opposite is for SHORT trades.
Stay with me...and we'll get to real examples.
and yes, on more pointer about the DIP:
both the dip has to happen in continuity. meaning, there should not be any spike to 100 [dip 1 short] on the opposite direction before dip2.
eh? .you say...well take a look at pic above, you see dip 1, and instead of CCI giving us dip 2 it spiked up and crossed 100 turned back and then gave a dip - it would be rejected. And the count [dip 1, dip 2] shall start afresh.
I hope you are with me so far.
Having understood the strategy rules, let's check out a few REAL examples:
Can you spot trades from the chart below? There's both LONG and SHORT opportunity!
This chart is a recent one - just last week !
Okay, lets walk through ALL the trades and situations on the chart here.
the first dip happened on 10-26 and spanned 2 candles
the second dip happened on 10-29 with a red candle
the very next one was a doji candle and by the end of this one, CCI successfully move above 100;
thus completing double dip
this doji candle becomes our trigger candle
we go long 10 pips above trigger cancle's high = 1.2924 [1.12914 + 10]
stop loss is the low of trigger candle = 1.2888; SL on this trade is 36pips
profit target = SLx2 = 72pips.
Taking profit is a flexible option;
We can use plain vanilla SLx2 option for profit targets;
or use partial profit booking and then using TSL [trailing stop loss] to ride out the trade;
this is left at the discretion of the trader and his risk appetite.
Now before you move further on the chart and discover short trade, i'd like you to go through the conditions for SHORT trade explained at the beginning of this article.
the first spike happened on 10-30-2012
and the second spike also completed on 10-30-2012
however, based on the rule to go long/short above/below the trigger candle = we did not get any trade;
instead there was spike 3! well, good for us;
confused? ...let's go step by step
double spike happened and the trigger candle is marked in the chart below.
low of trigger candle = 1.2954
sell stop = 1.2944
stop loss at high of trigger candle
trade did not trigger for the next 5 candles; and we had a 3rd spike.
well good for us! Because we have a 3rd spike...we now have a new trigger candle for short !
New sell stop details = 10 pip below trigger candle = 1.2956-10pips = 1.2946.
stop loss = high of the trigger candle = 1.3002
SL = 56 pips [1.3002-1.2946]
Profit = 112 pips [slx2];
did we achieve our profit target?....yes we did...but let's not brag about it!...
Nah...let's brag...here's the picture.
what a perfect system...!
you think so....NO.
Be warned: NO system can be so perfect. Sorry to disappoint you. Every system has its good and bad points; the trick is how YOU manage your trade. DISCIPLINE is a simple word but the hardest one to inculcate.
I have shared with you a system which should work, if YOU work with it.
And as always, there's be times when your SLs are hit and you decide to dump this system and go search for a whole new system...and the search shall not stop...until you find HOLY GRAIL.
This has been a very looong post = but i hope it was worth it!
Do let me know if you have any questions.
And, I am open to any constructive feedback you may have.
If you did like my post- show it by clicking on like button ! Thanks!
have a great contest !