How to Build and Trade Strategies: Trading with CCI and Camarilla Pivots

Forum on trading, automated trading systems and testing trading strategies

Indicators: Commodity Channel Index (CCI)

newdigital, 2013.08.30 11:45

Commodity Channel Index (CCI) Indicator

Developed by Donald Lambert

The Commodity Channel Index (CCI) measures the variation of a commodity price from its statistical mean/statistical average price.

The CCI indicator is an oscillator. 

The CCI oscillates between high levels and low levels

When the CCI is high it shows that price is unusually high compared to the average price. 

When the CCI is low it shows that price is unusually low compared to the average price.

The CCI oscillates between high levels and low levels

When the CCI is high it shows that price is unusually high compared to the average price. 

When the CCI is low it shows that price is unusually low compared to the average price.

Technical Analysis of Commodity Channel Index (CCI) Indicator

Overbought/ Oversold Indicator

The CCI typically oscillates between ±100. 

CCI values above +100 indicate an overbought conditions and an impending price correction.

CCI values below -100 indicate an oversold conditions and an impending price correction

Buy Signal

If the CCI is oversold, levels below -100, then there is a pending price correction. 

The oversold levels will remain intact until CCI starts to move above -100.

When price starts moving above -100 then that is a buy signal. 

The CCI buy signal should be combined with a price trend line break to confirm the signal.

Sell Signal

If the CCI is overbought, levels above +100, then there is a pending price correction.

The overbought levels will remain intact until CCI starts to move below +100.

When price starts moving below +100 then that is a sell signal. 

The CCI sell signal should be combined with a price trend line break to confirm the signal.

Trading Divergence with Commodity Channel Index

Bullish Divergence

Bullish Divergence occurs when price is making new lows while the CCI is failing to surpass its previous low. This is a bullish signal because the divergence will be followed by an upward price correction.

Bearish Divergence

Bearish Divergence occurs when price is making new highs while the CCI is failing to surpass its previous high. This is a bearish signal because the divergence will be followed by a downward price correction.

Forum on trading, automated trading systems and testing trading strategies

Indicators: Pivot Lines TimeZone

newdigital, 2013.10.30 12:57

Pivot Points Technical Indicator

Pivot points indicator consists of a central pivot which is surrounded by 3 resistance levels below and 3 support levels above.

Pivot points initially were used by floor traders to analyze and trade the equities and futures exchange markets. This indicator is considered to be a leading indicator rather than a lagging indicator.

Pivots provide a quick way for currency traders to analyze the general trend of how the market is going to be moving during the course of the day. This indicator uses only a few simple calculations to plot the resistance and support levels.

To calculate the pivot points for the coming trading day is the previous day's

• high,
• low, and
• close prices are used

The Forex trading day closes at 5:00PM EST this daily closing time is when the pivots are updated.

The 24-hour cycle pivots for this indicator are calculated using a complex formula, which the indicator will calculate automatically for you. The central pivot is then used to calculate the support and resistance levels as follows: 

• Resistance 3
• Resistance 2
• Resistance 1
• Pivot Point
• Support 1
• Support 2
• Support 3
  

Pivots can be used in different ways to generate Forex trading signals. The following methods are the most common technical analysis for Pivot points. 

Trend Identification Signals

The central pivot is used by traders to determine the general market trend direction. The trades taken will only be in the direction of the market trend.

• Buy signal- price is above the central pivot
• Sell signal- price is below the central pivot

Price Breakout Signals

Price breakout signals are generated as follows

• Buy signal- is generated when the price breaks upwards through the central point.
• Sell signal- is generated when the price breaks downwards through the central point.

Price Reversal Signal

Price reversals are generated as follows 

• Buy signal- when price moves down towards one of the support level, then touches the support or moves slightly through it then quickly reverses and moves upwards.

• Sell signal- when price moves up towards one of the resistance level, then touches the resistance or moves slightly through it then quickly reverses and moves downwards.

Setting Stop loss and Limit Profit Values using Support & Resistance Levels

The central pivotand the other support and resistance levels are used by traders to determine suitable stop loss and limit profit levels.

If a buy is placed above the central pivot point the Resistance 1 or Resistance 2 can be used to set the take profit level, and the Support 1 can be set as the Stop Loss Level for the trade.