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This is the last post about indicators.
I must emphasise the importance of Price Action,first and foremost we must rely on PA and then indicators help us in our trading .
Commodity Channel Index was originally introduced by Donald Lambert in 1980.It is an oscillator that shows when prices are overbought or oversold,like RSI or Stochastic.Divergenges between price and oscillator are another way to trade with CCI.
You can also use this indicator when you trade a pullback and let me explain how to do it.
You need to plot a triple CCI on your chart,the fast or trigger is the 14 period,the slow ones or confirmation are 100 and 200 period.
Now imagine we are looking at the chart and there is an Uptrend with a minor retracement,it could be a bullish pullback,a very good entry point with low risk and high return.The triple CCI will help us to enter the trade in the correct moment.We need that both slow CCI,100 and 200 period must be over the zero line,this confirm the uptrend even more.The fast CCI must be under -100 line because of the retracement has moved the price to the downside.When the up move begins again the price is rising and the fast CCI will move up crossing the -100 line,this is the moment to enter the position with a buy order.
For a Downtrend it is just the opposite : 100 and 200 period CCi below zero line,14 period CCI over the 100 line and when the bearish momentum begins again the fast CCI crosses down the 100 line and this is the best moment to sell the instrument.
I hope the triple CCI tool could help you when trading a pull back.
Have a nice day and good hunting
I must emphasise the importance of Price Action,first and foremost we must rely on PA and then indicators help us in our trading .
Commodity Channel Index was originally introduced by Donald Lambert in 1980.It is an oscillator that shows when prices are overbought or oversold,like RSI or Stochastic.Divergenges between price and oscillator are another way to trade with CCI.
You can also use this indicator when you trade a pullback and let me explain how to do it.
You need to plot a triple CCI on your chart,the fast or trigger is the 14 period,the slow ones or confirmation are 100 and 200 period.
Now imagine we are looking at the chart and there is an Uptrend with a minor retracement,it could be a bullish pullback,a very good entry point with low risk and high return.The triple CCI will help us to enter the trade in the correct moment.We need that both slow CCI,100 and 200 period must be over the zero line,this confirm the uptrend even more.The fast CCI must be under -100 line because of the retracement has moved the price to the downside.When the up move begins again the price is rising and the fast CCI will move up crossing the -100 line,this is the moment to enter the position with a buy order.
For a Downtrend it is just the opposite : 100 and 200 period CCi below zero line,14 period CCI over the 100 line and when the bearish momentum begins again the fast CCI crosses down the 100 line and this is the best moment to sell the instrument.
I hope the triple CCI tool could help you when trading a pull back.
Have a nice day and good hunting