This article unveils the CCI EclipseFX Strategy, a powerful approach that uses the Commodity Channel Index (CCI) with a crossover signal.
Starting with a Trend filter
To navigate the ever-changing Forex market, the CCI EclipseFX Strategy relies on two smoothed moving averages with settings:
- 50-period SMA, with forward shift 20
- 5-period SMA, with forward shift 2
The smoothed moving averages help us to read the trend and guide our trade signals.
Adding the CCI trigger indicator:
To generate trade signals, we use the CCI indicator in a slightly modified way:
- Standard CCI settings, period 14;
- Remove the 100 and –100 lines (these are not important for this strategy)
- Add a 13-period smoothed moving average to the CCI indicator (yellow line in the CCI on the chart)
You can add a moving average to the CCI in MT4 in the MA properties --> selecting apply to --> First Indicator’s Data.
With its moving average, the CCI indicator serves as the primary trigger indicator in the CCI EclipseFX Strategy. It generates our entry and exit signals.
The Buy Signal:
- First, wait for the price to move above the 50-period SMA (orange line). This means the trend is bullish.
- Then wait for the bullish CCI crossover (CCI crosses above its moving average). This is the trigger signal for a buy entry.
The Sell Signal:
- First, wait for the price to cross and stay below the 50-period smoothed moving average (orange). The trend filter means we should look for bearish trades.
- Then wait for the bearish CCI crossover (CCI crosses below its moving average). This is the signal to open a short trade.
When to ignore the signals?
The CCI EclipseFX Strategy exercises caution to avoid false signals, and we consider additional factors. You can notice we added the Money Flow Index with period 21 to the chart above. This is to show us the overbought and oversold levels.
- Avoid taking the trigger signals from the CCI when the MFI oscillator is signaling overbought or oversold.
- Additionally, you can use the short-term smoothed moving average period 5 (light pink color) for gauging overbought and oversold. When it separates by a wide area from the longer-term moving average (period 50, orange line), it potentially indicates overbought/oversold levels. If the MFI confirms this, the market is confirmed to be overbought/oversold, and we need to avoid taking trades.
The short-term moving average (period 5) can also be used as an early exit signal during steady trends. For example, in an uptrend, if the price stays consistently above it, generating profits, and then crosses below the moving average, it is a potential signal to exit the trade at a profit. The CCI may bearishly cross later.
The same principles to ignore the CCI signals apply to downtrends.
The CCI EclipseFX Strategy offers traders an effective and systematic approach to capturing Forex trends with precision. By combining the power of the CCI, moving averages, and the EclipseFX technique, traders gain a competitive edge in their decision-making process.
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