Forex Magic Breakout – Using the CCI Indicator to Find and Filter Trades

The CCI Trend Indicator for Trend Following Traders. Actually that’s not an indicator that make us successful. We know some very profitable traders trading with basic indicators or no indicators at all! One need an intelligent approach.

 
Maybe we could be profitable without any indicators. But indicators help much. For a beginner, it is much easier to trade a mechanical system based on indicators.

MagicBreakout strategy provides better filtering of bad trades. Your losses will dramatically decrease.

You will learn how to move stoploss and protect your open profit. Some traders don’t know where to move stoploss. They either risk too much, or they are stopped from a winning trade.

 

Phenomenal profit of 5400% in one year

 

Our student Alex Fitz made a phenomenal profit of 5400% in one year. He surpassed our performance several times, so we believed he was a lucky boy or a pure gambler.

We couldn’t accept that it is possible to make such a huge profit from conservative trading. Finally, he revealed his secret and kindly allowed us to publish it at the end of this trading system. Thanks, Alex!

 

Example

We got an automated buy signal at 2.0003. Our strategy tells us to place a stoploss at 1.9973. We are risking only 30 pips.

 

The stoploss was moved several times. Our account was growing until the last stoploss was hit.

 

We exited at 2.0155 and made 152 pips. Reward-risk ratio is 152 / 30, greater than five! Using safe money management we opened 8 minilots and we made 1216 dollars in one single trade.

 

Why are we trading with special indicators?

 

Actually that’s not an indicator that make us successful. We know some very profitable traders trading with basic indicators or no indicators at all! There is no indicator that will make you successful. It’s about the discipline and money management.

You can find many people in the forums spending countless hours testing new indicators. Exploring hundreds or thousands of indicators is a waste of time.

Frankly, we were also there. As we were developing our strategy, we were trying to find the most suitable indicators. But we were not looking for indicators that should hit the best entries and exits.

First, we had an idea about a trading system and then we were looking for indicators that would describe our strategy exactly. That’s the way how profitable traders achieved their success. The others are wasting time and money testing new popular indicators and switching from one to another.

It is highly unlikely that you will find a profitable strategy by randomly testing indicators. One can do far better gambling in Las Vegas.

You need an intelligent approach. Maybe we could be profitable without any indicators. But indicators help much. It is much easier for a beginner to trade a mechanical system based on indicators.

For a beginner, it is much easier to trade a mechanical system based on indicators.An year later, you can remove them from your chart because you will get a feeling of the market swing patterns.

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Magic Entry Rules

 

The rules are similar to the MagicBreakout strategy rules. First, we will discuss long entries. Have an eye to the changes.

  1. Be sure that the market is trending up.
    We have defined the perfect trend in Chapter III: Perfect trend.
  2. Price was above the Wave for some time.
    (above the Wave-top)
  3. Price entered the Wave.
    Price was above the Wave and then crossed the Wave-top downward.
  4. ColorCCI was yellow for at least five bars.
  5. CorolCCI changed the color from yellow to green; A POSSIBLE LONG ENTRY SIGNAL on the next candle open.
    This is a good signal to go long on the next candle open. But be careful…
  6. Check that all candle bodies were above the UpperWave.
    This important rule filters those swing patterns that plung too deeply.
  7. Check that the Wave was above the UpperWave at all candles.
    Again, this rule filters some other ugly swing patterns that plung too deeply.
  8. Buy now!
    If all above is filled, buy as new candle opens.

 

Practical implementation

 

Practically, you must follow the written rules backwards:

  • ColorCCI changed to green.
    Was it yellow for at least five bars? Is it green now? If yes, continue to the next step.
    Remember, the signal is valid only when the candle has already closed.
  • Is price trending up perfectly?
    Is price above the Wave-bottom? Is price above the UpperWave-bottom? Is Wave above the UpperWave? Stick with our definition! If yes, go to the next step.
  • Do you see a valid swing pattern?
    Train your eyes on the first few trades and you will see the swing pattern subconsciously without reviewing the rules. Review: price was above the Wave and then entered the Wave (inother words, price crossed the Wave-top downward).
    There are two additional filters to throw away bad trades (ugly swing patterns):
    1. Check that all candle bodies are above the UpperWave;
    2. Check that the Wave is above the UpperWave (especially at the swing-low).
    OK?
  • Buy now!
    And prepare your exit targets…

 

The rules for a short entry

 

You can simply create the rules for a short entry

  1. ColorCCI changed to red.
    Was it yellow for at least five bars? Is it red now? If yes, continue to the next step.
    Remember, the signal is valid only on candle close.
  2. Is price trending down perfectly?
    Is price below the Wave-top? Is price below the UpperWave-top? Is Wave below the
    UpperWave? Stick with our definition! If yes, go to the next step.
  3. Do you see a valid swing pattern?
    Train your eyes on the first few trades and you will see the swing pattern subconsciously
    without reviewing the rules. Review: price was below the Wave and then entered the Wave (in
    other words, price crossed the Wave-bottom upward).
    There are two additional filters to throw away bad trades (ugly swing patterns):
    1. Check that all candle bodies are below the UpperWave.
    2. Check that the Wave is below the UpperWave (especially at the swing-high).
    OK?
  4. Sell now!
    And prepare your exit targets…
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Magic Exit Rules

 

Look at the previous example once again. There are more blue arrows on the way. Some traders would buy more lots and add to the long position to achieve greater profit. Don’t do that! Your opened position may become too big. Remember, greed is your worst enemy. We will handle these magic entries in other way.

 

On every magic entry, move your stoploss just one point below the swing low (marked with the yellow dot). As you can see in the chart, the last stoploss was hit before the UpperWave-bottom was crossed. The stoploss protects our accumulated profit.

The magic exit rule:

  • Place the first profit target (sell-limit order) at 1.618 Fibonacci level;
  • Place the second profit target (sell-limit order) at 2.0 Fibonacci level;
  • Place stoploss (sell-stop order) at 0.0 Fibonacci level;
  • On every new magic entry signal, move the stoploss;
  • If the first profit target was hit, exit with one third of your position;
  • If the second profit target was hit, exit with another third of your position;
  • If the UpperWave was crossed as described, exit completely.

The magic exit is a combination of simple exit and advanced exit. In addition, a stoploss is moved. You should close a part of your position at Fibonacci levels and one third of your position has a potential to accumulate unlimited profit.

 

Summary for the next two months

 

 

Starting with $5000, there is $13,100 on our account after three months. We made $8100 or +162% in three months! Did you believe that you can double or triple your money in such a short time risking only 5% per trade? Here is the proof.

If you started with $10 000, you would make $16 200. If you started with $500, you would make $810. For a small account, we strongly recommend you a Forex broker that supports microlots (1 microlot = 0.1 minilot = 0.01 lot). These results come from a very conservative approach.

As your account grows, you can risk more than 5% of your initial account, actually 5% of your current account. This way your account grows faster and you can make explosive profits in a short time.

Note: To look at the MetaTrader historical data, disable autoscroll function and simply look back using the left key on your keyboard.

 

If the indicators look strange when loading historical data, restart MetaTrader.

 

How to trade with the trend

 

Although strong trends offer big profit potential, sometimes prices move sideways for a while, the market behavior is unpredictable and you can suffer a series of small losses. With this little trick, you can filter those losses and dramatically increase the winning percentage. The less you trade, the moreyou make!

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Trend vs. Chop

 

Chop, also known as horizontal price movement, flat market, range-bound market or sideways market, is a situation where the prices change little over a specific period of time. There is no clear direction for the market.

 

To distinguish between the trend and chop requires practice, but actually, it can be done simply – using the Wave.

 

 

Determine the clock angle of the Wave.

  • The market is in chop when the Wave is traveling at three o’clock. We should not take any signal.
  • The market is in strong uptrend when the Wave is traveling at noon to two o’clock.
  • The market is in strong downtrend when the Wave is traveling at four to six o’clock.

Now you see that we can do much better taking only the signals with the strong trend.

 

 

 

 

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you.

Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.

The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose.


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