High profit M5 Forex Breakout Trading System and Strategy. This M5 Scalping Intraday Breakout is a forex strategy based on the breakout box, CCI, ADX, and ASCTrend Indicator.
Commodity Channel Index (CCI) – An oscillator used in technical analysis to help determine when an investment vehicle has been overbought and oversold.
The Commodity Channel Index, first developed by Donald Lambert, quantifies the relationship between the asset’s price, a moving average (MA) of the asset’s price, and normal deviations (D) from that average. It is computed with the following formula:
The CCI has seen substantial growth in popularity amongst technical investors; today’s traders often use the indicator to determine cyclical trends in not only commodities, but also equities and currencies.
The CCI, when used in conjunction with other oscillators, can be a valuable tool to identify potential peaks and valleys in the asset’s price, and thus provide investors with reasonable evidence to estimate changes in the direction of price movement of the asset.
CCI measures the statistical variation from the average. It is an unbounded oscillator that generally fluctuates between +100 and -100. Traders use the CCI in a variety of ways. Three common uses are:
- CCI in retracements
- CCI on breakouts
- CCI in divergent trades
This article will be the first of three regarding common uses of CCI and will focus on how to use this oscillator in retracements.
CCI in Retracements
Approximately 70-80% of the values tend to fall inside the +100 to -100 range. Above the +100 value is considered overbought while below the -100 value is considered oversold.
As with other overbought/oversold indicators, this means that there is a large probability that the price will correct to more representative levels.
Therefore, if values stretch outside of the above range, a retracement trader will wait for the cross back inside the range before initiating a position.
Rules to trade a CCI retracement: First identify the direction of the prevailing trend. If you are trading off of a 4 hour chart, determine the direction of the daily trend. If you are trading off a 15 minute chart, determine the direction of a trend on the 1 hr chart
CCI in Up Trends
If the trend is up, wait for the CCI to move below -100 (oversold territory) and cross back above -100 to create a buy signal. Place your stop loss just below the swing low.
Look to take profits at least twice the distance to your stop loss so you are maintaining at least a 1: 2 risk to reward ratio.
CCI in Down Trends
If the trend is down, wait for the CCI to move above the +100 (overbought territory) and cross back below +100 to create a sell signal.
Place your stop loss just below the swing high. Look to take profits at least twice the distance to your stop loss so you are maintaining at least a 1: 2 risk to reward ratio.
Best Time Frame : 5 min above.
Best Currency pairs: EUR/USD, GBP/USD, EUR/JPY, AUD/USD, USD/CHF.
- Autoplot pivot Indicator;
- Swing ZZ Indicator;
- Exponential moving average 21 periods (close, smoothed);
- Breakout box 4 London opening range indicator;
- Box begin period ( 6:00) – period (End 8:00) – Box End (20:00);
- AscTrend 4TF;
- Commodity Channe Indx ( CCI) 45 period;
- Awesome Ave indicator.
- The price is above the box.
- AscTrend blue squares;
- CCI above 100 level;
- Awesome Ave blue bar.
- ADX above 30 line.
- the price is below the box.
- AscTrend red squares;
- CCI above -100 level;
- Awesome AVE red bar;
- ADX above 30 line.
- Make profit on the pivot points leves.
- Profit Target predetermined.
- Initial stop loss EUR/USD 16 pips, GBP/USD , EUR/JPY 20 pips. AUD/USD USD/CHF 15 pips.