356# Trading 50 cci

Submit by Maximo Trader (Written by Ivan G. Gonima ) 24/06/2012

 

DrBob’s three favorite setups are:

• 5014. It is a trend continuation sort of trade and it considers 50CCI, 14CCI, and the ZL

• 5034. It is a trend reversal sort of trade and it considers 50CCI, 14CCI, ZL and the 34EMA. It occurs less often than the 5014 but has a higher % of being a winner

• 5034Z. It is the first ZL Rejection after a 5034 signal

 

50CCI – 14CCI - Zero Line Cross / aka 50140 or 5014 – Trend Continuation Trade

This is the main trades he watches for and takes all day long. It works in any time, volume or tickframe but as stated before he is actually using a 133t chart. If you clearly understand that this setup represents a serious pullback in a trending market, you will have for sure a better chance of trading it successfully. It will basically get you in a trade just when the pullback is over and the trend is ready to continue. What are the conditions for this setup to occur?

 


1. 50CCI is above (below) the ZL. Remember that if the 50CCI crosses down (up) through the ZL, as we will see later when explaining 5o34, the uptrend (downtrend) is probably over. It does not have to be above (below) for any specific number of bars. As a matter of fact, it can just have crossed above (below) one bar ago to meet this condition.

 

2. 14 CCI drops (climbs) below (above) the ZL and crosses -75 (+75) or -100 (+100) in its way down (up) for hooking back up (down) later and crossing -75 (+75) or -100 (+100) in its way to test the ZL.

3. When to enter? This trade triggers when 14CCI comes back up (down) and crosses the ZL. Very often the real move begins at that point – when 14CCI crosses the ZL – so you are not missing much of the move by waiting.

If 14CCI turns back down (up) and crosses the ZL to the down (up) side, it is best to exit because you will have – almost for sure – a loser there.

 


Many times after the hook at -75 (+75) or -100 (+100) occurs, 14CCI will start up (down) but it will return down (up) again without crossing the ZL. This is the main reason why we wait until 14CCI crosses the ZL before going long (short). This will keep us out of bad trades and drop us in right around the time that the up (down) move is about to continue.

According then to the last paragraphs, you are basically looking for the 50CCI to be above (below) the ZL and a hook up (down) on the 14CCI after dipping (climbing) below the -100 (+100). The difference between the GB100 and DrBob’s 5014 is that DrBob does not count the number of bars or take the TLB as the entry point. Instead, he waits for 14CCI to cross the ZL.

 

50CCI – 34EMA – 14CCI – Zero Line Cross / aka 5034 – Change in Trend Trade

Another setup DrBob created and uses is the 5034. In this case, the 50CCI crosses up (down) above (below) the ZL at around the same time that the price bar crosses and closes up (down) above (below) the 34EMA. In other words, the 50CCI and the 34EMA are in agreement. Be this the time to say that 14CCI must be also above (below) the ZL.

You will notice many times that a 5034 setup is the beginning of a new trend; almost every great move begins with a 5034.

When do you enter this trade? It triggers when 50CCI crosses and closes above (below) the ZL at the same time 14CCI is already above (below) the ZL and the last price bar is closing above (below) the 34EMA. In that case you want to go long (short).

The only and main problem we have with this 5034 setup is that sometimes it reverses back through the ZL a few times in a choppy way. For trying to avoid choppy times DrBob has been filtering his signals with longer timeframes, looking at triangles forming on price bars – he does not take a signal if price is consolidating inside a triangle, please refer to Figure 2 and Figure 3 – and avoiding trading when 50CCI is stuck between the 100 lines.

Also, many times you will go long (short) on a 5034 and shortly thereafter the 50CCI will cross back down (up) through the ZL and price will close below (above) the 34EMA. In this situation you can reverse your position and go short (long) or at least you can exit your trade to avoid a sure loser.

When 5034 works, 50CCI will reach the 100 line pretty quickly. So, if it stalls or takes too long to do so you better protect yourself by quickly moving your stop to break even + 1 or so. Now, once 50CCI breaks that 100 line it usually will move fast in the direction of your trade. Just as an example, again only as an example, we could say that the March 2005’s average peak, after 50CCI cleared the 100 line, was 18 for Russell and Euro. Please refer to Targets and Exits for this subject on how to find stops and targets by keeping statistics.13 First Zero Line Rejection after 5034 / aka 5034Z

If you do not want to work to hard or feel it is too risky to take the 5034, take the first ZL Rejection, using the 14CCI, after that 5034; this is usually a high probability winner. For increasing odds even more, look for bounces from 34EMA when all these occur. It has been also said that it is even better when 5034Z occurs at the same time a Slingshot (dip below zero and return up above for longs) and a Plateau Trade are occurring. This is an extra piece of information this writer considers you may have but at the same time it is suggested you do your own research on that affirmation.

These are then the 3 main setups DrBob takes. However, he thinks it is still important for you to know about some other CCI setups that will help you understanding and trading better the setups already explained. Those setups are:

Shamu

DrBob suggests that we all learn when the shamu usually occurs because it is a very powerful pattern and it leads to a strong move most of the time. It is important to learn and understand when a ZLR could fail and turn into a Shamu. This is especially powerful when you have a 50CCI shamu at the same time the 14CCI is showing a ZLR or a bounce from the 100 line.

Normally, you would not take a 100 line bounce, but if the 50CCI is forming a shamu, you may consider it as a trading opportunity. Consider this if you have been burned often taking ZLRs; Dr Bob prefers the dips and hooks at the -100 as we mentioned earlier. Please refer to Figure 8.

Shamu after Ghost (SAG) – Change in Trend Trade

Many times after having a ghost, CCI will shamu and then fall out of bed. This happens both on the 14CCI and the 50CCI. Many times you may be tempted to trade a ZLR forming after a ghost. Wait, if you do not want to get burned, and better observe and try to anticipate if it turns instead into a shamu. Please refer to Figure 8.

 

Ghosts on 50CCI are just beautiful

Look for 50CCI Ghosts too. You can use it as an actual entry signal or as an exit if you are already in a trade in the other direction since this is a high probability reversal signal. 14

Stops & Targets & Exits

Be alert that when talking about stops and possible peaks, you have been only offered some examples. For finding your own trading settings you need to do your own research and create your own database of statistics for the market (s) you are trading. DrBob keeps statistics on all the winning trades in the Russell. A winning trade for him, while accumulating statistics, is one that provides a reasonable opportunity of profit based on visual evaluation of the charts. Also for the purposes of collecting and keeping statistics, the peak value is considered the highest (lowest) point of the move before 50CCI crosses back over the 100 lines.

DrBob’s spreadsheet accumulates this data and gives him a percentage calculation for each peak tick target level. He sets his targets off of that data. Currently, as of June 13, 2005, 90% of his winning trades go 7 ticks (so his first target is 8 ticks) and 60% of them go 11 ticks (so his second target is 12 ticks). He manages his third contract based on evaluation of the 50CCI above (below) the 100 line. Exiting on a CCI signal (TLB, Diver) or CCI crossing back across the 100 line is his drop dead exit.

Also as another example we may add that for March 2005 his first Euro target was 10 ticks with the rest of his contracts being managed with a CCI hook or counter trend signal after moving his stop to break even + 1. Many times, he will switch to a longer timeframe, like a 1,000v, and wait for a divergence, a counter CCI signal or a 100 cross. But, this is only if you are trading a multi contracts position.

Stops

As stated before, he uses a 6 tick stop on most of the markets he trades. When looking at his statistics spreadsheet for 5034, he would have needed a 4.2 tick average stop on the winning trades to stay in the trade for the big move without getting stopped out. So, according to this fact, if it does not go against you over 5 ticks, it is probably going to be a winner. That is why he uses 6 ticks.

 

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