One of the most remarkable Forex indicators and my personal favorite is the Commodity Channel Index also know as (CCI). This indicators acts as a warning when the market reaches extreme oversold or overbought conditions.
When In the use of the CCI indicator Of focus at +200 and -200 levels. So basically when the indicator moves below -200 level this means that the price is exaggerated and about to reverse and start moving upwards. On the other hand, If the indicator moves above the +200 level, this means that the price has been moving strongly upwards and its about to reverse and start to fall.
So it Is ideal for identifying reversals and will help you catch big moves early. But to make it more secure you can not only depend on this indicator alone.
To get the best results out of this, here is a way to have a win ratio of over 70%, and is in reality very simple and I’m going to share with you now.
1) you must first identify the trend to make sure that you trade with the trend and this is usually done with big time frames like 4hr chart or daily charts. If the price is making higher highs and lower lows, then this is a bullish trend. If the price is making lower lows and lower highs then this is bearish trend.
2) So, for example, let’s say you are in a market with a tendency, at this stage is only looking to sell. Now here comes the ICC of the paper.
In a trending market, if the price makes a brief retracement to the downside, and the CCI is below -200, which is a strong sign that the retracement is over and price will continue moving up again.
With a little confirmation like a candle in the inside bar or an outside bar you got your self a very low risk trade and a very good chance of winning this trade.
3) to make things clear let’s look at an example in a bearish trend. So if the price in a trending market makes a brief retracement to the upside and the CCI becomes above +200 this is a very good sign that the retracement is over and the price will continue the down trend very soon.
Now to wait to see the inside of a bar or an outside bar before you run the operation to make sure that the stock price is also confirmed that the decline is over and that the price will be more likely to go down from here.
This is a very good tactic that I use my self along with some support and resistance lines that are in a very profitable yet very simple Forex trading strategy.