33# Commodity Channel Index Average System Trading System

CCI Average Crossing

Our setup to buy is the CCI Average crossing from below -100 to above -100. The long entry condition is an upside penetration of a price channel. The setup assures us that we are buying low, and the entry technique requires prices to be moving up when we initiate a long position. Similarly, our setup to sell short is the CCI Average crossing from above +100 to below +100.

The short entry condition is a downside penetration of a price channel. The setup assures us that we are selling high, and the entry technique requires prices to be moving down when we initiate a short position. For both long and short trades, the setup is cancelled if the entry is not triggered within n bars of the setup. Also, a bullish setup is cancelled if CCI Average falls back below -100; a bearish setup is cancelled if CCI Average rises back above +100.

The system's trailing stop attempts to protect profits more aggressively than most other trailing stops do. In system, we're not trying to let profits run with loose trailing stops; instead, we're buying low / selling short high and locking in our gains as the market reaches overbought and oversold extremes.

Setup

a) Calculate a 30-bar CCI with a five-bar average.

b) Calculate a nine-bar price channel of highs and lows.

 

Long Entry Position

a) Identify a setup, with CCI Average crossing from below -100 to above +100.

b) Enter long at the highest high of the last nine bars.

c) If the entry is not triggered within four bars of the setup, or if CCI Average crosses back below -100, the setup is cancelled.


Short Entry Position

a) Identify a setup, with CCI Average crossing from above +100 to below+100.

b) Enter short at the lowest low of the last nine bars.

c) If the entry is not triggered within four bars of the setup, or if CCI Average crosses back above +100, the setup is cancelled.

Exit Orders

a) Our initial stop when long will be 4 pips below the two-bar low; our initial stop when short will be 4pips above the two-bar high.

b) When long, we'll trail a stop at the most recent swing low (strength one); when short, we'll trail a stop at the most recent swing high (strength one).

c) We'll also enable a money-management stop, a breakeven stop, and a $ risk trailing stop.

 

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