The logic for CCI Moving Average Crossover Trading Strategy is simple because we are combining both a trend following indicator as well as an oversold/overbought indicator
- Moving averages can show you the approximate trend and change of trend when the crossover occurs
- CCI is an oscillator that shows you whether the market is oversold or overbought.
Think about it this way: moving averages crosses showing you an uptrend combined with an overbought CCI, tells you which direction to focus on and when.
While not part of this explanation of a CCI/Moving average strategy is using price action (reversal candlestick patterns) as a means to add to the probability of a reversal of the trend and as an entry signal.
Once the moving average cross over happens which is confirmed by the CCI indicator, wait for a reversal candlestick pattern and then take the trade.
Trading Strategy Details
You can use any time frame but consider that amount of noise on lower time frames. Consider using 15 minute charts and above.
I always prefer to trade the major Forex pairs such as EURUSD and GBPUSD. Also consider the more volatile pairs such as GBPJPY or GBPAUD.
As mentioned in the title of this post, we are going to use only two trading indicators:
- CCI (commodity channel index) using default settings
- Two exponential moving averages set at 7 and 14. We use a fast and slow exponential moving average so we can see the potential trend change earlier
Do not add any other technical indicators to the mix for this strategy. The only addition will be the use of candlestick patterns of individual candlesticks.
Trading Strategy Rules
Please ensure you fully test the rules so you can do them without thinking.
Selling rules (short position:
- 7 EMA crosses the 14 EMA to the downside
- Wait for price to rally back to the moving averages
- Is the CCI above the 100 level or just crossed below it?
If those 3 points line up, you have a sell setup happening and to confirm the trading signal, you may want to use a price action entry such as a bearish reversal pattern
Once you enter the trade, you can use an ATR stop above highs and profits can be a multiple of risk or previous pivots.
Buying rules (long position):
- 7 EMA crosses the 14 EMA to the upside
- Wait for price to retrace back to the moving averages
- Is the CCI below the 100 level or just crossed above it?
See chart below for example:
Can You Use Multiple Time Frames?
One interesting use of the CCI/Moving average trading strategy is using it on 2 time frames. Using a 3-5 times higher chart for trend combined with the overbought/oversold condition plus trend change on a lower time frame, can help you get on board the higher time frame trend for more pips.
There will be times that you catch a major turn and the market begins to move with momentum. Ensure you have a proper risk plan in place and when the price is moving strongly in your favor, lock in profits.
Don’t forget to share this CCI Moving Average Forex Trading Strategy with your friends. Thanks