I called this PA 50 CCI forex system. PA stands for price action, and 50 CCI is the CCI (commodity channel index) indicator that set at 50. PA 50 CCI forex system is a further development of 123 MW forex trading system (www.bestfxtradingsystems.com/123mw-forex-trading-system/) that I use as the basic strategy of price action trading. If you have not read them yet go read them first before you continue reading this post.
50 CCI Trading System – Introduction
50 CCI trading system introduced by Dr.Bob from tradershaven.net but the site/blog does not active anymore, but I found them pretty good to developed into our own forex trading system (www.bestfxtradingsystems.com/). 50 CCI is also famous among the members of Woodie’s CCI Club (www.woodiescciclub.com/) as the core strategy/system for stocks, futures and options trading. Ok let’s tune up the 50 CCI trading system with price action trading strategy to trade on foreign exchange market. Read on…
PA 50 CCI Chart Setup
There are several Indicators you should have in your forex trading platform, they are:
1. Fractals and Zig Zag Fractals indicators, they will make you easier to recognize the price action and the chart patterns. This is the most important part of this forex system, I already mentioned that these two forex indicators is really helpful to boost your learning process on price action forex trading.
2. The 50 CCI (commodity channel index), your chart will look like this :
50 CCI (Commodity Channel Index)
The important basics of 50 CCI you should know:
- If the 50 CCI is above the zero line the trend is up/bullish, if it is below the zero line the trend is down/bearish.
- If the 50 CCI is above the 100 level then the upward trend is strong, and if it is below the -100 level then the downward trend is strong.
- Above the 250 level, then the price is over bought and if it is below the -250 the price is oversold.
- When the 50 CCI going up from below -100 level area to the above of the -100 level it means that the price is ready to make a reversal movement.
- When it is going down from above 100 level area to the below of the 100 level it means that the price is ready to make a reversal.
- The Divergences, when you see this pattern it means that the price/previous trend is ready to make a reversal movement or it will make a pause in a flat/horizontal movement because the previous trend is losing it’s power. There are two divergences, they are bullish divergence and bearish divergence. I will try to explain more about this with some examples on the next post. It look like this :
50 CCI Divergences can help us to recognize when the trend will end.
3. 14, 34 and 204 EMA (Exponential Moving Averages). The most important one is the 34 EMA, it represent 50 CCI on the candle well. If the candlestick/price is below the 34 EMA, it’s likely that the 50 CCI is below the zero line, and vice versa if the price is above the 34 EMA, then the 50 CCI is likely above the zero line.
Here is the picture :
PA 50 CCI Forex System
PA 50 CCI Forex System – Optional Indicators
Well… I include these indicators because I used to use it. You can use it if you want, but this is optional indicators only. Here they are :
- GP Clock, it shows us the time remaining from the last candlestick before it will make a new one.
- I – Sessions, it consist of three boxes. They shows us three market sessions time(Asia, Europe and US) and the price range of every session.
- Signal Bars v7, It shows us various information. Such as the Current Price, Spread, Pips to Open, High to Low and Daily Average. Quite useful indicator, I like it. But we are going to ignore the MACD, STR and EMA bars, we don’t use them.
- Because 34 EMA is very important and it’s represent the 50 CCI quite well, we are going to make a channel from it. Put other EMA, 34 EMA apply to high and 34 EMA apply to low.
That’s it your chart is going to be like this :
PA 50 CCI Forex System With Optional Indicators
These meta trader 4 indicators are free to use you can have them from forex factory.
How To Use PA 50 CCI – The Strategy
- Entry : Same as 123 MW forex trading system, buy or sell at the break of the number two. Buy if the price is above the 34 EMA and 50 CCI above the zero line. Sell if The price is below the 34 EMA and 50 CCI below the zero line.
- Stop Loss : Same as 123 MW forex trading system. Put your stop-loss above or below the last fractals up or fractals down. Move your stop-loss step by step to lock your profit if you want to continue to follow the trend.
- Target Profit : Same as 123 MW forex trading system. Or, for sell you can close the trade when the 50 CCI going up from below -100 level area to the above of the -100 level. For long position, close the trade when 50 CCI going down from above 100 level area to the below of the 100 level.
- Risk/Money Management : risk 2 – 5 % of your trading account per trade.
- Pairs : Euro/USD, GBP/USD, USD/CHF, USD/JPY, AUD/USD and Euro/GBP. Euro/USD, GBP/USD and Euro/GBP are my favorite. I have never used it on the other pair.
- Time Frame : 15 Minutes, 30 Minutes, 1 Hour and 4 hour.
PA 50 CCI Starting Guide
- Limit your pair to two or three pairs only. One pair only for beginner.
- Choose the time frame that fits you most.
- Try the demo account first, until you doubled or tripled your account. Write down your trading plan, then you may use your real account.
- If you use 15 and 30 minutes, draw the trend line at 1 hour and 4 hours to get the big picture of the trend (www.bestfxtradingsystems.com/how-to-define-the-trend/). For 1 hour and 4 hour, you should also draw the daily trend lines/support resistance.
The most important part of the PA 50 CCI forex system is the price action. All the indicators that we use here is only to support and reinforce the bigger picture on the trends that are happening. And finally will sharpen our instincts to execute our trade and makes us more confident to get out of the market at the right time. The indicators are not moving the price, they just follow the price movements. To make you better understand how PA 50 CCI forex system works I have posted some examples of the trade.