Woodies CCI - trade strategy from Ken Wood
Ken Wood in his time created a strategy based on the Commodity Channel Indicator (CCI) and LSMA, and it was distributed free of charge. The Woodies CCI system has proved so popular that it is still being applied. The basic version remains freely available now, so attention definitely deserves.
Installing and configuring indicators
The strategy forex trading produces signals with minimal delay and can be applied without time slot and currency pair restrictions.
Woodies CCI strategy uses:
2 indicators CCI;
The Least squares MA is a modified version of the moving average. Only used in some vehicle versions.
The Woodies CCI forex trade system is installed in the same way as the standard indicator - the file should be placed in the Indicators folder. For more information on setting indicators, see this guide.
In the settings of only 2 parameters:
CCI - period of normal commodity channel index;
TCCI is the fast Forex indicator period.
In an indicator window:
Displays 2 CCIs - fast (green) and slow (black line).
A histogram is added for ease of trend identification. The Woodies CCI strategy determines the trend by TCCI line position, if for at least 6 Japanese candles the line is under zero, we have a downtrend. The fifth column of the histogram is painted yellow - attracts the attention of the trader.
Other versions of the indicator are found in the network, with the addition of other sales tools, signage, etc. But the basic version is built on 2 indices of the commodity channel.
Working on the Trend in Woodies CCI Strategy
The author of the strategy advised at the beginning of the work to trade only in the direction of the trend, 4 types of signals are identified:
Removal of CCI from zero level - it is desirable that the upward trend is already established. There are certain tolerances - under the loss is also considered the overrun/underrun of the line to the zero level. Tolerances depend on the volatility of the instrument on which the strategy is used, usually having a range of ± 30 or ± 50.
The Woodies CCI strategy actively uses builds on indicator lines, the Price Action deviation pattern with a reversal implies strengthening the break from the zero level of the trend line break. This pattern should be formed in the upstream downstream market.
Breakdown of the trend line. All the difference from the previous pattern is that no CCI removal from the zero level is required. When building a trend line, the trend itself should not change, only in this case the pattern refers to the work in the direction of the trend.
Woodies CCI strategy uses horizontal levels of support and resistance as well. The work is carried out in the direction of breakdown, which coincides with the direction of the current trend. Lines are constructed on at least 2 peaks/depressions located at approximately the same level.
All the patterns listed above are only relevant if there is no trend change.
Working Against Trend in Woodies CCI forex trade system
Countertrend patterns are separated by 5:
Famir Shamu is the same departure from zero, but he turns out to be false, and the price continues to move, crossing the zero line and securing behind it. The trend changes.
Vegas is a line from the extremum zone (it is desirable that CCI visit the ± 200 level). In the zone ± 50 there is a smooth turn in the direction of the trend, but then there is a sharp break against the trend. The price is fixed to the zero level, and the trend changes, the entrance - to the break of the level passed through the base of the valley.
The Woodies CCI trading system uses graphic patterns as well. Ghost is a copy of the head and shoulders model from technical analysis. The only requirement is that the head should be above both shoulders and this pattern should be formed in the area of extremes.
The hook from the extremum is a turn of the CCI line from the region of extremes ± 200. The most widespread pattern.
Breakdown of trend lines and support/resistance levels. Woodies CCI strategy uses them both as a pattern of continuing trend and as a turning figure of technical analysis.
Extremes not only CCI, but also TCCI can be used to build trend lines. When working with these patterns, it is worth taking into account other signals confirming those given by the Woodies CCI forex trade system.
Rules of vehicle operation
When operating on Ken Wood 's vehicle:
Consider TCCI behavior, if you have a long position open, you can close the transaction manually when crossing TCCI-CCI from top to bottom in the area of 100;
If CCI is not moving in the right direction, the deal is also better to cover or tighten the stop loss;
You can close the transaction by changing the color of the histogram;
Hook from the extremum strategy forex trading Woodies CCI also uses as a signal to exit the position;
A trend line breakdown is another signal to exit the market.
In the example, the short position is open on the Vegas pattern, the exit from it - after crossing the trend line at the price.
The Woodies CCI strategy is still relevant, with Ken Wood himself (its author) experimenting with renko charts to date and even selling his signals. However, the basic version of the vehicle can be applied in all markets and without time frame restrictions.
Wood traded on short timeframes, we do not recommend the use of Woodies CCI for minute schedules, the optimal interval of M15 use is H1. Signals will appear too rarely on 4-hour charts. And don 't forget about the quality of the signals, the closer they are to the ideal, the more likely it is to work out.