This document
was written by Goinglite. It was written approximately in 2001/2 and posted on
the Talkstox forum with continual updates. That forum no longer exists. This
document is a summation and clarification of the trading techniques taught by
Woodie at that time as seem through the eyes of Goinglite, a student of CCI at
the time.
Goinglite still
posts charts daily on http://charts.dacharts.com/
and is still using CCI (as of March 2005)
When this
document was written the concept of trading CCI without price was not taught. Since
this document was written the methodology has changed. Many additional CCI
methods have been added and dropped.
The strength of
Woodie’s sharings of how he trades CCI, in my opinion, has always been enhanced
and expanded by the contributions of those that have studied his methodology
and added there own insight and additions to Woodies original CCI methodology. Resulting in, the teacher teaching the student and the student
teaching the teacher.
CCI and Turbo CCI
Tips and Nuances by GOINGLITE
I. The Main Stuff.
1. Woodie's Setup.
a. Very simple 3min and 5min Charts with just the CCI and No Premarket Data ( No "All Sessions").
a1. Note: "All Sessions" charts also work well.
b. The CCI's Setting is: 14 period, HLC/3.
c. The Turbo CCI's Setting is: 6 period HLC/3
c. The 3 Min Chart Should only show 25 to 30 Price
Bars.
d. The 5 Min Chart Should only show 25 to 30 Price
Bars.
2. The CCI in General.
a. The CCI can be used as a trading system in and of itself.
b. The CCI works well with Other Indicators.
c. The CCI works well with Other Systems of Trading.
d. The CCI works well with Futures and Stocks.
3. The
a. 3 Min Chart used for Setups.
b. 5 Min Chart used for the "Bigger
Picture".
b1. Sometimes the 5 Min Chart can provide confirmation for the setups on the 3
Min Chart.
b2. Also, the 5 Min Chart can be used for Setups.
4. The Turbo CCI.
a. Shows Divergences that The CCI may miss.
b. When The Turbo CCI Crosses The CCI, it's often an
early "Trend Change" warning.
c. When both The CCI and The Turbo CCI Diverge together, The Turbo CCI will
often signal 1 to 2 bars earlier.
d. Can draw a trendline from a Peak/Valley of The CCI
to a Peak/Valley of The Turbo CCI.
e. Can draw trendlines on The Turbo CCI, alone.
f. The Turbo CCI can often show an overbought/oversold condition not seen by
The CCI. (Such as The Turbo CCI Slingshot.)
5. To Determine the Trend on The CCI.
a. On The CCI, The Zero Line is the Dividing Point
between the Uptrend and the Downtrend.
b. When The CCI is Below The Zero Line for at least 5
or More price bars, look to go Short. Exception would be Divergences.
c. When The CCI is Above The Zero Line for at least 5
or More price bars, look to go Long. Exception would be Divergences.
6. A CCI Warning.
a. The CCI Indicator measures Momentum.
a1. The Greater the angle of the CCI line, the greater the momentum.
b. Be careful if the CCI line is "Flat". A
Flatten CCI line means NO Momentum.
b1. Trying to enter a setup with a "flat" CCI Line will increase your
chances of getting stopped out.
7. The CCI Retracement Principle.
a. The CCI will often do an approx. 50% Retracement of it's
last move.
b. CCI 50% Retracements can be important areas for Support and Resistance.
c. CCI 50% Retracements can confirm certain CCI Setups.
d. I look for Zero Line plays to be a part of a 50% Retracement of the last CCI
move.
8. The 5 Strongest CCI Setups.
a. Regular and Reverse Divergences. (The Most Powerful
Setups.)
b. Trendline Breaks With The Trend.
c. A Zero Line Cross & Trendline Break Combo. (Trend and/or Divergence
Helps, but not a factor)
d. Zero Line Bounce/Re-Cross & Trendline Break Combo With The Trend. (Very
Powerful)
e. Horizontal Trendline Breaks. (High Percentage Plays.)
9. Definitions of Divergences.
a. Regular Divergence is basically for Counter Trend Trades.
b. The basic rules for Regular Divergence are as follows:
b1. To go Long, The Price makes a Lower Low, The CCI
makes a Higher Low.
b2. To go Short, The Price makes a Higher High, The
CCI makes a Lower High.
c. Reverse Divergence is the opposite of Regular Divergence.
c1. Regular Divergence is usually for counter-trend Plays. Reverse Divergence
is usually for Trend Continuation.
d. The basic rules for Reverse Divergence are as follows:
d1. To go Short, The Price makes a Lower High, but The CCI makes a Higher High.
d2. To go Long, The Price makes a Higher Low, but The CCI makes a Lower Low.
10. Reverse Divergence.
a. Reverse Divergences are for Trend Continuation
Setups.
b. Reverse Divergences are more reliable than "Against The
Trend" Regular Divergences.
c. On Reverse Divergences, use Trendline Breaks for
Entries.
d. On Reverse Divergences, the Zero Line can be a point of entry.
11. Regular Divergence.
a. Regular Divergences are for "Against The
Trend" Setups.
b. Regular Divergences usually have the +/- 133 line
Touch/Cross for entries. (Woodie uses The +/- 120 Line
for Divergence Entries.)
c. On Regular Divergence, you can use Trendline Breaks.
d. On Regular Divergence, you can use the Zero Line as a point of entry.
e. Trading against the Trend can be risky. Lock in
Profits. Use good money management.
12. Divergences.
a. To find reliable Regular Divergences, you should look for 3 to 10 Price
Bars.
b. To find reliable Reverse Divergences, you should look for 3 to 15 Price Bars.
c. During The Opening Range ("Day Session
Charts"), You can use data from The Previous day to Spot Reverse and
Regular Divergences.
13. The CCI Zero line.
a. The CCI Zero Line is the strongest point of
Support/Resistance. ( I use a "Zero Line
Zone" between The +/-33 Lines.)
b. The CCI Zero Line is also The Trickiest Area to
Trade from. It can be a rich source of "Fakeouts".
c. I like Zero Line Setups that SHOW DIVERGENCE, Trendline Break, and are part
of a 50% Retracement of The last CCI Move.
d. Trendline Breaks with The Trend, that are close to
The Zero Line, are The Most Important Trendline Plays.
e. An entry can be made off of a Zero Line bounce, cross or re-cross With The Trend.
f. An entry can be made off of a Zero Line bounce, cross or re-cross with
Reverse Divergence.
g. The Zero Line can sometimes be a point of entry for Regular Divergence.
h. You can also "add" to your position on a Zero Line Cross.
14. The +/- 100 Lines.
a. When The CCI gets Above +100, The Market is
becoming Overbought.
b. When The CCI gets Below -100, The Market is
becoming Oversold.
c. The +/- 100 Lines are often entry points for
Regular Divergence. (The +/- 133 Lines are a Better
Entry Point.)
15. Trading CCI Trendline Breaks.
a. Because CCI Trendlines show Support and Resistance, they can be a rich
source of Fakeouts.
b. I like to draw CCI Trendlines starting from at least the +/- 100 Line.
c. Can draw a trendline from a Peak/Valley of The CCI
to a Peak/Valley of The Turbo CCI.
d. Can draw trendlines on The Turbo CCI, alone.
e. I like trendlines that are part of a CCI divergence and/or a 50% Retracement
of the Last CCI Move.
f. The longer The Trendline, The Better.
g. I look for Trendline Breaks With The Trend.
h. Trendline Breaks with The Trend, that are close to
The Zero Line, are The Most Important Trendline Plays.
i. Trendline Breaks can be done, with The Trend,
without Divergence.
j. Trendline Breaks can be done, with the Trend, with
Reverse Divergence. (Very Powerful)
k. Trendline Breaks can be done, against The Trend, with Regular Divergence.
l. Trendline Breaks can be part of a Zero Line Cross,
Zero Line Re-Cross, or Zero Line Bounce Combo.
m. On the CCI, during the opening range ("Day Session" Charts), you can draw trendlines using the CCI "peaks" or
"valleys" from the previous day.
16. Horizontal Trendline Breaks.
a. To go Long, you look for
a1. The
a2. Can draw a Horizontal Trendline off of 2 Peaks, but 3 peaks are better.
a3. The
a4. Your entry is on The Break of the Horizontal Trendline.
a5. Can be done with or without Divergence.
a6. I like to see Horizontal Trendlines close to The Zero Line.
a7. High percentage play.
b. To go Short, you look for
b1. The
b2. Can draw a Horizontal Trendline off of 2 Valleys, but 3 Valleys are better.
b3. The
b4. Your entry is on The Break of the Horizontal Trendline.
b5. Can be done with or without Divergence.
b6. I like to see Horizontal Trendlines close to The Zero Line.
b7. High percentage play.
17. The CCI Extreme +/- 200 or higher Hook.
a. On CCI Extreme Hooks, watch out for the Regular Divergence Trap.
a1. On Regular Divergence, an Extreme Hook may only indicate that the market is
slowing down, but has not Reversed yet.
a2. In other words, just because the CCI Hooked,
doesn't mean that the Price has to Hook.
b. Will have to use other indicators to filter Extreme Trades.
c. I also like CCI Extreme Hooks off of Reverse Divergence.
d. An Extreme CCI hook, off of a strong Regular Divergence, doesn't need a
Filter.
18. Turbo CCI Slingshot.
a. The Basic Setup is when The CCI goes to The Zero Line or "Zero Line
Zone" while The Turbo CCI runs to The +/- 100 Line.
b. The Trigger is when The Turbo CCI and The CCI "hooks".
c. On this Setup I like to see Divergence, 50% Retracement of The Last CCI
Move, and if possible, a Trendline Break.
19. My Favorite CCI Setups.
a. The Touch or Cross of The +/- 133 Line with Reverse
or Regular Divergence.
b. The Turbo CCI Slingshot with at least Divergence,
and a 50% Retracement of The Last CCI Move.