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Monday, June 15, 2009

Forex CCI Divergence Breakout

Timeframe : 15mins and above
Indicator : CCI (Commodity Channel Index
Description : This strategy uses hidden divergence and price action to take a breakout trade
. Divergence is the one
key indication in the market that can be useful and is not lagging. It is a sign of a market reversal coming up in the near future. Understanding and making use of divergence will help a technical trader greatly when analyzing the market.


Note : On my CCI, I always connect my peaks (tops) never the bottoms (dips).

Long Breakout


- Price must be trending downwards
- CCI must go towards the upward direction and bounce
- After a bounce on the CCI, connect your high peaks on your price
- Aggressive : At a clear close above the trend line enter long
- Conservative : After the trend line is broken, wait for a pullback to the trend line to enter

Short Breakout

- Price must be trending upwards
- CCI must go towards the downward direction and bounce
- After a bounce on the CCI, connect your dips on your price
- Aggressive : At a clear close below the trend line enter short
- Conservative : After the trend line is broken, wait for a pullback to the trend line to enter

Stops

- If your trend line is not that steep, you can keep your stops at the high/low of the breakout candle.
- If your trend line is steep, keep your stop at the swing high/low
- If your trend line is medium steep, keep your stop at the low of couple candles away

Exits
- 1:1 Risk to reward. If your stop is -12 pips your limit should be +12 pips.
- Open 2 lots. If your stop is at -10 pips, once your trades goes in your favor and you're at +10 pips, close 1 lot and let the other one run. Exit at Support and Resistance levels.
the other one run. Exit at Support and Resistance levels.
- Exit at the nearest 50 or 00 level. These are psychological levels. (make sure your exit is at least the same number
of pips as your stop, otherwise dont enter the trade)
- Trailing Stop. Once in a trade, at the close of each candle, place your stop 1 pip below the low (if in a buy trade). Vise versa for sell trade.

Short Example


Long Example


Spread Trading Strategy
A properly placed stop loss can benefit your spread trading strategy. Make money whichever way the market is moving, rising or falling. Spread trading is tax free, opening a trade is easy, and you can close out positions quickly. Try it!

------- SBJ ------ by; Navin prithvani ------ 

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