CCI and Momentum trading is an intradaysystem will shortly explain all the indicators we will be using.Time Frame 15 min or 30 min. Currency pairs: majors.
Momentum
The Momentum indicator is a speed ofmovement (or rate of change) indicator, that is designed to
identify the speed (or strength) of aprice movement. In other words you should be buyingwhen the price is picking up momentum and selling when that momentum has been lost.
We use Momentum with period 60,computed from typical price. The rule is that we go long only if theMomentum is higher than 100, and go short if Momentum is lower than100.
Commodity Chanel Index – CCI
The Commodity Channel Index indicatoris based on an observation that the market moves in cyclicalmovements which means high and low of the price are coming inperiodic intervals and in
consecutive fashion. So, if we candetect those cycles we can detect the beginning and the ending
of the trend. CCI is used to help identifyprice reversals, price extremes and trend strength.
We use CCI with period 60, computedfrom typical price.
Entering the trade
As I said earlier, our trading time is5:30am GMT time. You should get to the computer about 5
minutes before 5:30 and wait until thecandle finishes.
For indicator values, you should checkthe chart at a close of 5:15am candle at 5:30am.
I use Alpari UK broker, so 5:30am GMTis 7:30am in broker time that you see on the charts.
LONG signal
We will go LONG (buy) if and only ifALL the following conditions are met:
1. Momentum(60) of the 5:15am candle ishigher than 100 AND lower than 100,8 (in other
words between 100 and 100,8)
2. CCI(60) of the 5:15am candle ishigher than 0
Then we will buy at Market price.
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CCI and Momentum Intraday Trading |
We can see that Momentum is above 100(but below 100,8) and CCI is also above 0, so we enter
Long by Market price.
SHORT signal
We will go SHORT (sell) if and only ifALL the following conditions are met:
1. Momentum(60) of the 5:15am candle islower than 100 AND higher than 99,2 (in other
words between 99,2 and 100)
2. CCI (60) of the 5:15am candle islower than 0
Then we will sell at Market price.
We can see that Momentum is below 100(but above 99,2) and CCI is also below 0, so we enter Short
by Marketprice.
NO TRADE
We will NOT TRADE for the day if someof the conditions are not met.
For example Momentum >100, but CCI <0; or if Momentum > 100,8
Example
At 22 July 2010, you can see that theconditions to enter either long or short were not filled.
Momentum is below 100, but CCI is above0.
We will always use fixed Profit Target40 pips and fixed Stop Loss 40 pips. After we enter the trade,
we don’t manage it; we simply waituntil it hits profit or loss. You can leave the computer and check
the result in the evening or nextmorning.
ALWAYS DOUBLECHECK that you have setyour Stop Loss and Profit Target properly before leaving thecomputer!
Money Management
Rule1
Always use Stop Loss.
Stop Loss (SL) is an order that willtell the system to cancel the trade at the given loss, if the marketis going against us. This way it protects us by keeping our losesdefined and small. Trading without SL or moving SL will eventuallylead to account wipeout.
If the market is going against us, weshould simply accept the small loss and quit the trade. All tradingsystems are based on probability or some edge. There is no systemthat will only win. Losses are a part of the trading, and whatmatters is the positive result at the end of the month or year, nottoday’s loss.
Stop Loss of 40pips, so you will never lose more than 40 pips on one trade.
The general rulefor any system is to NOT risk more than 2 % of your trading accounton one trade.
This means thatif you have account with $2,000 capital, you should risk maximum 2%of it on one
trade, which is$40.
Because our StopLoss is always 40 pips, you can trade Forex Morning Trade with 0.1standard lot
(which is 1minilot, and 1 pip is $1).
If you haveaccount with $ 10,000 capital, your 2 % risk is $200. Because ourStop Loss is always 40 pips, you can compute the lots size using theformula: Minilots = (risked amount) / (SL in pips).
In our case:$200/40 pips = 5 minilots (which is 0.5 standard lots and 1 pipequals to $5)
So, with $10,000capital and trading 0.5 lots, if Forex Morning Trade System wins,you’ll earn $200, if it loses, you lose $200.
A good rule toremember: if I use 0.1 lot, then 1 pip = $1. If I use 0.2 lots, then1 pip = $2 and so on.
