CCI and Momentum Intraday Trading

CCI and Momentum trading is an intraday system 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 of movement (or rate of change) indicator, that is designed to

identify the speed (or strength) of a price movement. In other words you should be buying when 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 the Momentum is higher than 100, and go short if Momentum is lower than 100.

Commodity Chanel Index – CCI

The Commodity Channel Index indicator is based on an observation that the market moves in cyclical movements which means high and low of the price are coming in periodic intervals and in

consecutive fashion. So, if we can detect those cycles we can detect the beginning and the ending
of the trend. CCI is used to help identify price reversals, price extremes and trend strength.

We use CCI with period 60, computed from typical price.

Entering the trade

As I said earlier, our trading time is 5:30am GMT time. You should get to the computer about 5

minutes before 5:30 and wait until the candle finishes.

For indicator values, you should check the chart at a close of 5:15am candle at 5:30am.

I use Alpari UK broker, so 5:30am GMT is 7:30am in broker time that you see on the charts.

LONG signal

We will go LONG (buy) if and only if ALL the following conditions are met:

1. Momentum(60) of the 5:15am candle is higher than 100 AND lower than 100,8 (in other

words between 100 and 100,8)

2. CCI(60) of the 5:15am candle is higher than 0

Then we will buy at Market price.

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 if ALL the following conditions are met:

1. Momentum(60) of the 5:15am candle is lower than 100 AND higher than 99,2 (in other

words between 99,2 and 100)

2. CCI (60) of the 5:15am candle is lower than 0

Then we will sell at Market price.

Example

We can see that Momentum is below 100 (but above 99,2) and CCI is also below 0, so we enter Short

by Market price.

NO TRADE

We will NOT TRADE for the day if some of 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 the conditions to enter either long or short were not filled.

Momentum is below 100, but CCI is above 0.

We will always use fixed Profit Target 40 pips and fixed Stop Loss 40 pips. After we enter the trade,

we don’t manage it; we simply wait until it hits profit or loss. You can leave the computer and check

the result in the evening or next morning.

ALWAYS DOUBLECHECK that you have set your Stop Loss and Profit Target properly before leaving the computer!

Money Management

Rule1

Always use Stop Loss.

Stop Loss (SL) is an order that will tell the system to cancel the trade at the given loss, if the market is going against us. This way it protects us by keeping our loses defined and small. Trading without SL or moving SL will eventually lead to account wipeout.

If the market is going against us, we should simply accept the small loss and quit the trade. All trading systems are based on probability or some edge. There is no system that will only win. Losses are a part of the trading, and what matters is the positive result at the end of the month or year, not today’s loss.

Stop Loss of 40 pips, so you will never lose more than 40 pips on one trade.

The general rule for any system is to NOT risk more than 2 % of your trading account on one trade.

This means that if you have account with $2,000 capital, you should risk maximum 2% of it on one

trade, which is $40.

Because our Stop Loss is always 40 pips, you can trade Forex Morning Trade with 0.1 standard lot

(which is 1 minilot, and 1 pip is $1).

If you have account with $ 10,000 capital, your 2 % risk is $200. Because our Stop Loss is always 40 pips, you can compute the lots size using the formula: Minilots = (risked amount) / (SL in pips).

In our case: $200/40 pips = 5 minilots (which is 0.5 standard lots and 1 pip equals to $5)

So, with $10,000 capital and trading 0.5 lots, if Forex Morning Trade System wins, you’ll earn $200, if it loses, you lose $200.

A good rule to remember: if I use 0.1 lot, then 1 pip = $1. If I use 0.2 lots, then 1 pip = $2 and so on.