What Is CCI Indicator And How To Use It Efficiently In Forex Trading

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What Is CCI Indicator And How To Use It Efficiently In Forex Trading

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Trend trading is always a safe solution. To be able to grasp the current trend, you need a reliable indicator to identify it. CCI is an indicator designed to help you with this in Forex trading. Today, I’m going to show you how to use this effective trend indicator.

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What is the CCI indicator?

The Commodity Channel Index (CCI) is an indicator used in the world of financial market analysts. On the price chart, CCI is an oscillating line between the fixed levels of +100, and -100 which are the overbought and oversold zones of the market. This is a very good trend indicator so that traders can identify price trends.

What is the CCI indicator?
What is the CCI indicator?

How to use CCI in Forex Forex trading

Often, traders use CCI to determine price trends. There are 2 signals that CCI offers traders about a trend that is trend continuation and trend reversal.

CCI indicator’s trend continuation signal

This is the most notable signal of CCI. Specifically, the uptrend of the price is renewed whenever the CCI falls below -100. And then when it rises above -100, the trend will continue. It shows that the trend is getting stronger.

The trend continuation signal by CCI
The trend continuation signal by CCI

The same thing happens when the market is bearish. Every time the price hits +100 and then falls again, the price continues a new downtrend.

The trend continuation signal by CCI
The trend continuation signal by CCI

CCI divergence signal and price trend reversal

CCI divergence is the phenomenon in which the indicator goes against the price. This is a warning signal that the price will reverse the future trend. Specifically:

+ The price is trending up (the next peak is higher than the previous one) but CCI is falling. This phenomenon is called bearish divergence. It signals a price trend reversal from bullish to bearish.

CCI divergence signal and price trend reversal
CCI divergence signal and price trend reversal

+ On the contrary, the price is trending down (the next trough is lower than the previous one) but CCI is increasing. This phenomenon is called bullish divergence. It signals a price trend reversal from bearish to bullish.

CCI divergence signal and price trend reversal
CCI divergence signal and price trend reversal

How to trade Forex simply and effectively with the CCI indicator

CCI is a momentum indicator that shows whether a price trend is strong or weak. Watch and take a closer look at CCI so you can keep an eye on what’s going on. This can help you find very accurate trending trades with CCI.

Notes: These are test transactions to get used to the CCI. You should not apply it to real accounts. Register a Free demo account by clicking the button below to test and keep your capital safe.

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Forex trend continuation trading with CCI

This way of trading is quite simple and easy to do. You just need to wait for a clear trend from the market and then use CCI to enter a trade.

Open a BUY order in an uptrend with CCI as follows:

+ Entry Point: After CCI hits the oversold zone (-100) and then rebounds, the price will then create green reversal candles, indicating the continuation of the uptrend.

+ Stop-Loss: At the nearest support before the CCI hits -100.

+ Take-Profit: when the price touches old resistance levels that have been formed in the past.

Forex trend continuation trading with the CCI indicator
Forex trend continuation trading with the CCI indicator

Open a SELL order in an uptrend with CCI as follows:

+ Entry Point: After CCI hits the overbought zone (+100) and then falls back, the price will then create red reversal candles, indicating the continuation of the downtrend.

+ Stop-Loss: At the nearest resistance before the CCI hits +100.

+ Take-Profit: when the price touches old support levels that have been formed in the past.

Forex trend continuation trading with the CCI indicator
Forex trend continuation trading with the CCI indicator

Trade Forex with the CCI divergence

The advantage of this Forex trading strategy is that it is safer for your capital. CCI divergence is a very reliable price reversal signal. However, you will need to be patient to be able to place orders with this trading strategy.

Open a BUY order after the CCI bullish divergence appears as follows:

+ Entry Point: when CCI crosses the -100 level and goes up after diverging.

+ Stop-Loss: at the 2nd price bottom as CCI forms a bullish divergence.

+ Take-Profit: when the price touches old resistance levels that have been formed in the past.

How to trade Forex with the CCI divergence
How to trade Forex with the CCI divergence

Open a SELL order after the CCI bearish divergence appears as follows:

+ Entry Point: when CCI crosses the +100 level and goes down after diverging.

+ Stop-Loss: at the 2nd price top as CCI forms a bearish divergence.

+ Take-Profit: when the price touches old support levels that have been formed in the past.

How to trade Forex with the CCI divergence
How to trade Forex with the CCI divergence

In conclusion

The CCI indicator is used the most when the market is in a long trend. The signals which this indicator gives you will help you understand what will happen next. Get acquainted with CCI today to perfect your trend trading skills in Forex.

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