To predict is for slaves… To react is for kings! We
don’t guess at what the market will do. We use Woodies CCI system guidelines
to take our trades.
Another incredible secret to Woodies CCI is that all of
the entry and exit signals are well defined and very clear. All you do is
react to these entry and exit signals. No thinking needed.
You will need to read through the entire document to
fully understand the information being presented next so do not get too
wrapped up in it. Just start getting used to the nomenclature. Do not get
frustrated. Just read on through the document a few times. You will be fine.
Woodies CCI exit signals are the same for all Woodies
CCI patterns. They do not change.
Let me repeat that. Woodies CCI exit signals are the
same for all Woodies CCI patterns. They do not change.
The idea behind these exit signals is that when the
trade momentum is starting to fade or the trade is starting to go against
you then it shows you a signal to exit. The CCI shows you this. You do not
need to think or guess or go into hope mode. Just follow the guidelines and
your losses will be small. You don’t need to struggle to keep your losses
small. Follow the guidelines and this is done automatically.
Do not predict what prices are going to do. We do not
care. You should not care. And we do not want to see these types of comments
posted in the room. It is nothing more than bias and useless guessing. We
let the CCI tell us what price is doing. So should you.
Do not use small preset targets as your exit point. Use
Woodies CCI exit signals as defined to exit your trade. There is even a rule
to help you take some profits even if the CCI hasn’t signaled a pure CCI
exit yet and we are at a very nice profit so don’t worry. If the market will
only give you a small profit then that’s what Woodies CCI will give you as
well. Just let Woodies CCI take it from the market. Some people do use order
management tools that places a profit limit order set to what we call ‘home
run’ targets worth anywhere from $300 to $500+ per contract and this is
fine. However, let the CCI and Woodies defined exit signals take you out of
the trade.
Don’t bother with the talk about risk/reward ratio
target setting. This is mixing two types of trading methods and will not
work while you are learning Woodies CCI system. Most that talk about it do
not realize what risk/reward even means to a certain trade setup, not to
mention how to find certain types of trade setups that will allow this type
of trading. People love to talk about it because they think it’s as easy as
just setting stops at say a value of X and setting a target at 2 times that
amount. This is just absurd. Take what the market gives you. Focus on the
CCI signals. Let Woodies CCI tell you when to enter and when to exit. You
need to learn this first before you can be successful in trading Woodies CCI
system.
In fact, this type of ratio target setting requires extensive knowledge about trading setups, markets movements and the trader needs to have price measurement abilities. It’s actually not hard, but few understand it. Furthermore risk/reward ratios are defined in terms of price. CCI does not show price directly and we do not look at price for our setups. Stop-loss orders are set in terms of price, not in terms
of CCI movements so they can’t easily be used in this
fashion when new to trading Woodies CCI. Until you no longer need this
document just use Woodies CCI exit signals.
As mentioned before, always protect yourself with
predefined hard stop-loss orders for safety.
Do not watch price bars. Do not focus on prices. Do not
focus on the losses or gains of your trade after you enter. Follow Woodies
CCI only. Let your hard stop-loss order protect you from any disaster.
Woodie has defined both the entry and exit signals for
all CCI patterns. Only enter and exit on these signals.
There is no other way to enter a trade. Quit
trying to make stuff up. It’s already defined.
There is no other way to exit a trade. Quit
trying to make stuff up. It’s already defined.
When you enter a trade the CCI will no doubt wiggle
around, flip back and fourth and up and down to some degree. You must
remember that we are not in this trade forever. The CCI we use is based on a
short period of time. You should expect to be exiting soon relative to the
time frame you are using. Do not turn this into an investment and go into
what Woodie calls “The Hope Mode.” Even if you just got in and the CCI bar
flips against you then you will learn in this document that you will be
exiting that trade at that moment. Be very clear on this point.
Before you ever start paper trading Woodies CCI you
need to pick an appropriate type of trading style for you and your
personality. These different types of trading styles are ‘very aggressive’,
‘aggressive’, or ‘conservative’. Pick your method now and stick with it. It
is suggested that you use the ‘aggressive’ method. However, no one can
choose for you. Paper trade all 3 styles over time and choose for yourself.
It needs to fit your style. You will know the right one when you are trading
it. Do not worry about this. However, once you choose an entry style then
stick with it long term. Do not decide how you enter before each
trade. This will not work.
The ‘very aggressive’ trading style means that you
enter at the first hint of a setup. This is when the CCI bar has just
flipped or turned into position to create a CCI pattern for the first time.
This would be our entry if we choose this style. This style is not
recommended.
The ‘aggressive’ trading style means that you enter the
trade when the CCI bar has flipped or turned such that it forms a CCI
pattern setup and is still in that position when there is 20 seconds left on
count down clock. The idea is that with only 20 seconds left on the clock
before the CCI bar prints it is highly likely that the pattern will still
hold the same position or close to it for you when it prints on the chart.
The ‘conservative’ trading style means that you enter
as soon as the CCI bar actually prints on your chart to form the CCI pattern
and then moves on to start forming the next bar. This style is not
recommended.
The conservative trading style not recommended even for new traders as CCI is a momentum indicator and that implies certain things. We need to take advantage of that momentum. When the CCI bar flips or moves into position it is indicating that there is a change in recent prior momentum and we need to react to capture that recent momentum. Waiting for the CCI bar to actually finish by printing can and will most
often be too late to get a good entry when compared to
just 20 seconds or so earlier. Simply put, the fact that the CCI bar went
into position and that it has been there for the entire bar until the last
20 seconds is enough proof that the momentum is on our side. Even waiting
for the 20-second countdown clock can be too long. But when compared to the
bar close method it’s a much more reasonable choice. Nothing is guaranteed
of course but if it turns on us we exit anyways so we are safe.
Having said that you could wrongly conclude that the
very aggressive style would then be our best bet since momentum just changed
or moved into position with that system. I wouldn’t argue but we want to
have some sustained proof that the move is going to hold. I hope that you
can see the aggressive approach is a nice balance between the two. However,
whichever one you chose you must stick with it. Do not keep changing
methods. This will not work. You cannot trade react fast enough if you are
trying to decide which approach you want to take while you are watching the
trade setup in front of you. That would be called thinking and we know that
does not work.
Even though you are paper trading always, always,
always use hard stops. It’s best to have these automatically placed at the
time of your trade. These are the safety stops used just in case the market
turns on you dramatically. That’s all they are used for. Ask what Woodie
might use for hard stops-loss orders on a particular market.
For example for YM we might use 12+. For ER we might
use 1.0+. For ZB we might use 4+ ticks for our hard stops. This depends on
which market you trade and may not work every day as well as it did the day
before. But it’s important to keep them the same from day to day. If you
find these are too tight for the current day then stop trading and review
your entries. Regardless of whether you are entering the trades correctly or
the stops seem to be tight you can’t keep trading that particular day. Do
not re-adjust your stops while trading for that day. The market will be back
tomorrow. Again, talk to others about what stops Woodie uses.
Important! You do not wait for a trade to hit
your hard stop-loss to exit. These are used as protection against events
that can occur during trading that you cannot react fast enough to. If you
let your trade be taken out by these stop-loss orders when trading then you
will lose your account and you are not trading Woodies CCI system correctly.
You do wait for a CCI exit signal to exit your
trade. Once you see that signal then exit your trade. You may have a profit
or a loss. It does not matter. Do not focus on that. Just follow the CCI
patterns, entry and exit signals. You will become a very good trader. Your
profits will take care of themselves.
If you get stopped out before you see a CCI exit signal
or before you can exit your trade then that’s fine. That is why the hard
stop-loss order is set. Move on and wait for the next pattern to scroll by.
Woodie does not use the TCCI to enter a trade.
Woodie uses the CCI pattern only to enter a trade. The TCCI is only used to
help show divergence when the CCI isn’t, to help draw trend lines and as an
early warning signal to exit a trade.
In regards to entry signals the TCCI is used as an early warning only. It lets you know that the CCI might be changing its direction and end up following the TCCI. Use TCCI as a warning only. Not as an entry signal.
If you want to wait for a trade entry signal until you
get both a CCI pattern and a CCI confirmation signal as well then this is
quite acceptable and works very well. Your trade entry style (i.e. very
aggressive, aggressive or conservative) is still the same as far as how you
enter the trade. You would just wait until you see both of these signals to
occur together before entering the trade per your chosen style.
Also, you can choose to enter the CCI patterns with or
without CCI confirmation signals. Adding CCI confirmation signals can add to
the probability that the trade will be strong. The CCI confirmation signals
are:
·
trend line break (TLB)
·
zero-line cross (ZLC or ZLX)
·
+/-100 CCI cross (100c or 100x)
These CCI confirmation signals, in order listed above,
are when the CCI indicator line breaks through a trend line, crosses the
zero-line and lastly crosses through the CCI +/-100 value on the chart. You
will understand these better as you read on. The TLB confirmation signal is
also used as a CCI trade pattern. Don’t let this confuse you. It can be used
as both.
Some examples of a trade entry using CCI patterns and
CCI confirmation signals are as follows:
·
zero-line reject (ZLR) and a zero-line cross (ZLC)
·
zero-line reject (ZLR) and a trend line break (TLB)
·
reverse divergence (rev diver) and a trend line break (TLB)
·
reverse divergence (rev diver) and a +/-100 Cross (100x)
·
ghost and a trend line break (TLB) and a +/-100 cross (100x)
·
vegas trade (VT) and a shamu and a zero-line cross (ZLC)
You can even have 3+ pattern/confirmation signals on
the last two trade entries listed above. You would enter the trade on the
last pattern/signal that develops in the combination. Regardless of the type
of trade style you choose trading with confirmation signals is not necessary
but it adds power to the CCI Pattern setup and will likely result in a
higher degree of success in your trading.
Another use of the CCI confirmation signals is to show
you that the trade you entered, without waiting for a CCI confirmation
signal, is on the right path and doing well. Some people even add to their
position at this point but you should not do that while you are learning
Woodies CCI.
It is also important to know that while watching the chart you will see the CCI indicator move and flip around a little or a lot. It might move fast or slow. No one can tell what will happen next. You cannot know what pattern will print next. No one knows. No one has a clue. All you do is follow the chart, spot a pattern, enter the trade when you spot an entry signal and exit it when you see an exit signal. That is what you do. So it doesn’t matter what you think the pattern will do. You just react to what it does do. It may even flip back around and go back the opposite way again after you enter or exit a trade. We don’t care
because we know we can’t predict what is going to
happen. You shouldn’t care either. Woodies CCI gives you safe profits and
protects you from large losses. Let it work for you. React. Don’t think.
Woodie has defined a set of pure CCI exit signals.
There are no other CCI exits. Do not make up exits.
Woodie created the CCI exit signals for a reason. It is
the most crucial part of the system. Why would you not follow them? If you
want to be successful then you must exit when you get an exit signal.
Follow these exits precisely. No excuses. Period.
CCI Exit Signals
Explanation
The exit signal defined as ‘Profit equal to hard-stop’
is not a true CCI signal of course. It’s defined in terms of ticks equal to
around your hard-stop loss order setting. You set your hard-stop loss away
from the market at a set number of ticks that will allow free movement of
the CCI work its own signals. It stands to reason that if the trade
progresses with positive gains to equal this amount in ticks before giving a
CCI signal that we should partial out. Play it safe and partial out 1
contract and set remaining position to b/e+1 as stated before when you see a
nice profit. This condition will not always present itself. The CCI will
signal far sooner than this will happen so don’t focus on it.
The exit signal that is mentioned above as ‘not moving
/ no progress’ is one that will need some additional explanation. For this
exit signal we would exit if the CCI trade is not moving much at all or does
not keep going in our direction. We expect the trade to move after we get
in. After all we did enter when momentum was in place so it’s reasonable to
expect it to keep going. If it stalls or becomes stagnant, even though it’s
still pointing in the same and correct direction, then we must exit. If the
CCI bar presents this condition then it hasn’t turned around on us and so we
are not losing much if anything at all so we can give it some time to watch
it closely. If it does not move forward into profits in under a few minutes
then it’s best to exit the entire trade. Woodie guarantees better trades
down the road!
You will learn to recognize what these Woodie CCI exit signals look like as you read on through this document. However, for added clarity the CCI exit signals listed above can all happen anywhere in the
CCI region on the chart except for the CCI cross of the
zero-line exit signal, which has to occur at the CCI zero-line value, and
the CCI hook from extremes exit signal, which has to occur at the +/-200 CCI
value area or greater such as +/-250 or even +/-300, etc.
When one or more of these exit signals is seen it may
mean that another one of Woodies CCI patterns is setting up. This new CCI
pattern could be a signal for a trade entry that goes against your current
position. This is why we exit our trade. For example a ZLR could turn into a
shamu. If we don’t exit and go into “Hope Mode” then we are not following
Woodies CCI guidelines and we will quickly lose our trading capital. Do not
violate these guidelines.
If trading one contract then you will exit your trade
in full as soon as you see one of these signals. You may give it a few
seconds after the signal appears to see what the CCI bar is going to do but
do not wait any longer then when there is 20 seconds left on the
count down clock or a few ticks left on the tick counter before the bar
prints.
Also, never wait for the CCI bar to print against you
when you need to exit. Doing so would be way too long to wait around in the
trade, which will cost you profits and give you larger losses. This exit
rule is very strict because we want to lock in profits and the CCI is
warning us that it may go against us so we must exit. Even if it doesn’t end
up going against us we don’t care. We take the safe exit as shown by Woodies
CCI and protect our trading capital. Another trade is few minutes away. We
are in no hurry.
After entering a trade if it goes your way, maybe 7+
ticks for most futures, 4+ ticks on ZB, and 10+ on YM, but still has not
given you a first exit signal then you need to change your hard stop-loss
order to break-even plus 1 tick (b/e+1). Once a trade has gone nicely in
your direction then do not let it turn into a loser. This is the guideline
and you must follow it. Changing the hard stop-loss order is very easy using
a good front-end tool. Usually just once click and it’s done. Ask the room
what Woodie uses as a profit point in which to move stops to b/e+1 for a
particular market.
If trading more than one contract then you should
consider exiting your contracts in at least two separate points. You can
even use two exit points and leave some in as a runner as well. Just as long
as you use Woodies CCI exit signals to partial out along the way you will be
fine. Be sure to set the remaining contracts to b/e+1 to protect profits.
The first spot in which you partial out your trade when trading multiple
contracts is defined above. The next set of exit signals will be defined
below. They are of course similar in nature.
The only exception to this rule is if right after you
enter you see that it immediately turns on you, you get a very bad feeling
in your stomach and you say “OH NO!” This type of exit is when the trade
turns hard and fast against you in a very harsh manner or you entered
completely by mistake. Do not stay in the trade to wait around and
see what will happen. When this happens you must exit the entire position
immediately. You cannot go wrong by exiting a trade right after you entered.
Again, just exit the entire trade in full without questioning it or thinking
about it. There will be better trades down the road. Woodie guarantees it!
If trading two or more contracts then you exit half or partial out at the first exit signal and set the stop-loss on the remainder of the contracts in your position to b/e+1.
Also, never change your stops after you set them
as defined by these guidelines. Do not trail your stops. This leads to more
thinking and focusing on prices and will cause errors. Do not think. Do not
change your stops. Never ever violate these guidelines. Even Woodie does not
change his stops for this reason. You should not either.
To be very clear on this you would enter your
hard-stops at the same time you took a trade. Then you would set your stops
on the remaining position to b/e+1 after you get your first CCI exit signal
and partial out unless you had a CCI pattern failure or “OH NO!” entry in
which you would exit your trade in full of course.
The next set of exit points are described below. These
are really no different then the ones defined above except that they give
the trade a little more time. This is fine. This is how Woodies CCI helps to
automatically take profits (1st exit point explained above),
protect our profits (setting our stops to b/e+1), and keeping losses small
and letting winners run (allowing the trade to progress after setting
stops). It’s all included so just follow it.
If you are trading 2+ contracts then after you partial
at your first exit signal and set your stops to b/e+1 you would then partial
out of some more contracts and/or exit in full each time you see one of the
following signals. You keep doing this until you have exited your entire
trade position:
Can you tell that we don’t wait around very long?
Is it very clear to you that we exit when the CCI turns
back the other way against our entry?
Do you understand that the very first exit point is the same when you are trading 1 contract or if you are trading 2+ or more contracts?
Do you understand that all the exits are very well
defined and require no thinking, guessing or hoping?
Is it clear that we want the trade to go our way as
soon as we enter?
All this is done without watching price bars. We don’t
need them. CCI monitors them for us perfectly and will tell us when the
momentum is turning against us. Trade the guidelines exactly as defined.
With every single trade and for all of Woodies CCI
patterns you will enter and exit the trades the same way every time. No
changes. No thinking. No making up new exit signals. No waiting around to
see what will happen. You exit, exit, exit. Period. Follow the guidelines
and you will be fine.
You do not have a choice about when to exit. Woodies
CCI defines all exits for you.
Woodie has spent a great deal of time, many years in
fact, defining these exits to be optimal.
Just exit the trade and wait for the next pattern to
come along.
Woodie does not use pure limit orders to enter or exit
trades. He mostly uses market orders to enter and exit his trades. When the
CCI gives you the signal to enter or exit a trade and you try to use a limit
order you could either miss the order or still be left holding a position in
a bad trade.
When using market orders you need to trade thick and
liquid markets so that there is not much slip on your order fills. Woodie
usually only trades during standard market hours so using market orders
tends to be fine.
When using market orders pay special attention to
currency futures markets such as EUR, JPY, GBP, etc or even some futures
indexes such as HSI as they can be very jumpy regardless of the time of day.
Be forewarned that this can cost you unexpected losses. Try to trade these
types of markets during times of heavy trading or just stay away from
trading them at all until you no longer need this document.
If limit orders are needed for entry then you can use a
front-end that will allow you to enter at the best price possible and chase
it a set amount of ticks if the market moves away from you. This will allow
you to try to get the best price and will still allow some limited chasing
if the market moves away from you. Some people may use around 2 ticks for
this.
Regardless of how you enter your trade consider just using pure market orders to exit your contracts. You do not want to be left behind trying to get a better price while the market moves away from you. When you get the CCI signal to exit the trade you want out now. Do not try to get cute. Just exit. Period.