CCI indicator Forex or Commodity Channel Index is a technical tool which primarily finds utility in trading commodities. But this oscillator also finds utility when trading currencies and equities. This tool fluctuates from 100 to -100 and is usable in retracements, divergent trades, and break-outs.
This post will emphasize on its usage, so all those new to venture, just follow this post properly.
Explaining how to use it for 1st timers:
Suppose you are trading with GBP/USD and are using a 4-hour trading chart. What you need to do is use this and find out the direction of the prevailing market trend. (However, when you are doing it on a 15 min trade chart, make it a point to identify the market trend on 2-hour charts).
In case of an up-surging market trend, you will have to wait for the CCI to go under the -100 point. This is the territory of Over Sold. And you also have to wait for it to cross back up over the -100 mark.
Experts state that this is where the Buy signal will generate. You will have to put your Stop Loss right underneath the swing low point and your Take Profits about 2 times the distance of your Stop Loss. This will enable you to maintain a risk reward ratio of 2:1
In case of downtrend, you will have to wait for this pro CCI Forex indicator to cross over the 100 point which is the Excess Bought region. Simply place your Stop Loss underneath the swinging region and keep your Take Profit at 2 times the distance for a 1:2 risk reward proportion.
Explaining this better:
Suppose your GBP/USD is trading at 1.4220 and as per your CCI indicator Forex, you see it cross below the -100 point. As per rules of this tool, it is a potential BUY proposition. So what you ought to do is place your Stop Loss under the swing LOW fat 1.4671. Keep in mind to employ your Stop Loss for not more than 2% risk allowance.
A simple tool tyro traders can incorporate in their strategy!
Similar in many ways to an RSI or Stochastic, this CCI indicator helps traders get a clear picture of the OverBought/Sold scenario. It is Low when prices are below the average price for a set period and High when vice-versa. It is very simple to use, and that explains why it is such a popular choice amongst so many traders across the trading sphere.
Download, Install, and trade:
With everything known to new traders now, it would be wise to find a reliable broker, preferably one offering a MT4 platform and start using it in demo. MT4 demo presents backtesting benefits, and traders can run this indicator through some extensive testing to determine its actual proficiency.
CCI indicator Forex manuals are also available for download and so traders new to this venture should also go through it once. So quit wasting time and start using this amazing tool. Riches are plenty to acquire from this market. Formulate a strategy and bring home your deserving share.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.