Trade the fundamental principals of financial markets- at your own risk!

In this presentation here, I will attempt to explain everything as thoroughly as possible and all questions will be answered with consideration.

As with any method that carries positive expectancy next to its title, you need unshakeable discipline to follow simple rules, apply common sense and employ a winning attitude to make it work for you.

This is an intraday trading method, that aims to capture substantial market movement with an excellent risk/reward while limiting the number of signals in a very clear cut way. Watching the charts all day is extremely boring, especially when we have no clue what is about to happen. The temptation to trade out of boredom is immense, "the market is running away, I don't want to miss the train", "I just missed a $XXXX move, next time it goes like that I'll find a reason to get in!". Those are just some of the things you'll be telling yourself while watching an intraday chart and the signals that you're looking for just aren't there, be warned.

In order to establish the fact that waiting for the absolutely best signal is of utmost importance and detrimental to your success, you may have to actually watch these charts, get bored, tell yourself the things mentioned above, enter trades recklessly, incur substantial losses to your account only to find out that waiting was totally in your own best interest.

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The Charts:

We will be using a single timeframe, the 15M. The only time we will be looking at another timeframe is when we are drawing trendlines and identifying important levels in the market.

On your chart overlay the following:

150 EMA
50 SMA
CCI 50 + 14(See attachment)

The CCI is an indicator which many people do not like for some reason, its main purpose here is to boost your confidence and act as a great visual aid to gauge the momentum in the market. Credit is due to Dr Bob whom first described the use of the 50 CCI in a document available on a different website. For information about the CCI and what it does refer to
http://stockcharts.com/school/doku.p...nnel_index_cci
Please don't skip this link.

Your Chart should look like this:

Some key points:

* I use this strategy on Yen crosses such as Aud/Jpy, Eur/Jpy and Gbp/Jpy
These pairs provide fantastic volatility which when combined with these setups provide potentially very rewarding trades, risk/reward wise. It works on any volatile instrument.

EDIT: See post #97 for CCI indicator

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More coming up in a flash.

Interesting and looks simple. I am hoping you will reveal your entry and exit strategy, as well as the best time, market to trade. Since most of your pairs revolve around the yen are you trading the Asian market? Is that the market time to trade this system?

At this point, I'm assuming you'd read thoroughly through the link provided about the CCI indicator and have digested it.

The 50 CCI zero line infact represents a 34 period EMA, in a very effective way. When price is above the 34 EMA, the 50CCI will be above the zero line and when price is below the 34 EMA, the 50CCI will be below the zero line.

To us, the Zero line on both CCI's represents minor or major support/resistance areas, don't forget this.

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Before I begin showing how the signals are generated, we must first identify key levels in the market, to avoid mistakes and suprises as much as possible, this is the only time we will be looking at other timeframes. For trendlines, I switch to the 4 hour chart and find the most important levels through which I can draw lines, EUR/JPY Example:
http://i4.tinypic.com/8ggbxty.jpg

The green lines are key support/resistance levels from the weekly and daily chart. Forget to put these lines on your chart at your own risk. Feel free to use long term fibs as well, as in Weekly chart kind of long term, they can be handy.

I will start with the prettiest, most ideal setups and then we will move on to more difficult situations in which we have to pay attention to what is going on in the market.

We do not trade with a trend that cannot be seen on the 15 minute chart using the criteria setforth. It is very convenient to have the trend defined at a glance from a single chart and I endorse this approach.

Setup Description.

Essentially we have 2 setups that represent different things in the market.
The first setup represents a deep pullback in a trend and the second is a breakout from tight channels

Setup 1 Conditions: (Long) [Exit and stop strategy will be explained in the next post]

(a) Price travels above the 50SMA and the 150EMA. This is our indication for a trend change, the separation between the bulls and bears.

(b) Both the 14 CCI and the 50 CCI are above the Zero line

(c) The 14 CCI Returns to the Zero line area and a Zero Line Reject occurs

(d) This setup has a variation which occurs many many times and is a decent trade: When the 14 CCI continues to travel below zero without rejecting it, but the 50 CCI is still above or at the Zero line, we are looking for 14 CCI to turn right back around and cross the zero line again in the direction of the trend. Again this is only confirmed on bar close and the 50CCI has remained above the zero line throughout this process

Zero Line Reject for those of you unfamiliar with CCI simply means the CCI line rejected the zero area, this represents a pullback. This can ONLY be comfirmed on the close of the bar. If the zero line reject is confirmed, but the 14 CCI line closes above +100 on the completion of the ZLR, the setup is invalidated. Think of it as 'too far too fast'.

The kind we are looking for can only occur if the 50CCI does not close below zero, it must remain above zero while the ZLR is occurring on the 14CCI EUR/JPY Example:

http://i3.tinypic.com/82mngnn.jpg


I'll reiterate the text above for a short just to make things crystal clear...

Setup 1 Conditions: (Short)

(a) Price travels below the 50SMA and the 150EMA. This is our indication for a trend change, the separation between the bulls and bears.

(b) Both the 14 CCI and the 50 CCI are below the Zero line

(c) The 14 CCI Returns to the Zero line area and a Zero Line Reject occurs

(d) This setup has a variation which occurs many many times and is a decent trade: When the 14 CCI continues to travel above zero without rejecting it, but the 50 CCI is still below or at the Zero line, we are looking for 14 CCI to turn right back around and cross the zero line again in the direction of the trend. Again this is only confirmed on bar close and the 50CCI has remained below the zero line throughout this process

EUR/JPY Example: http://i12.tinypic.com/89uzb4z.jpg

Heres an example of a large gap between the 2 averages, this gap is around 80-90 pips, plenty of breathing room, so once price went through the 50SMA, it then made a sharp pullback but the gap remained wide and a viable trade towards the 150EMA appeared

http://i8.tinypic.com/7yoaty0.jpg

Hi, can you pls advice on the information below: When do the following market open in GMT:- London Market Japanese Market US Market Australia Market Europe Market Switzerland Market Thanks for the anticipated reply.

When we see this condition on the 50 CCI, you can bet your ass that price will be doing just this.. that is NOTHING.. get ready for a straddle. AUD/JPY examples:

http://i2.tinypic.com/6ye76uh.jpg

http://i11.tinypic.com/8adwbcw.jpg

In the last few days we had some very nice trades, these dont happen every day nor should we expect the market to move like this.. expect small but substantial movement but be ready to take more if it is offered.

EXITS:

Here you have several options.. Every trader must find what is best for him/herself.

1. A CCI exit is when the 14 CCI has extended below/above the -100 / +100 Line or more on the indicator and then hooks back down the -100 / +100, the crossing back triggers an exit.
Many times with this exit if the market did not move substantially you are more vulnerable to losses or very small profits. This however is a very objective exit and may be used. On the other hand, a new trade could be just around the corner!

If you look at the example below, we can see this market made a severely profitable gap which this method enabled you to catch. In this situation, we should be aware that a very deep pullback is due at one point or another, the CCI exit for this trade would be the hooking back from the -200 rather than the -100. Mind you, even during such huge moves, the CCI may still not reach -200/+200 and you will make do with a -100/+100 Hook back exit.

We have an advantage when we have both the 50 and the 14 CCI on our chart, if we see this kind of gap but the 14 CCI never made it to the -200 extreme levels, it may be so that the 50CCI actually did and will signal a hook back from -200/+200 sooner than the 14 CCI will reach for the 100 line, helping us to lock in more profit. Yipee.

If we see a very strong trend and your trade is very deep in the money, an option to exit is only when the 50CCI crosses the zero line again, this is however not recommended.

Another option for the hazardous trader <that is, provided the trade you'd caught is very directional> is to exit on the first bar that closes against the direction of the move, i.e you went short so you will exit on the first bullish bar. This exit method many times will take you out of winning trades far too soon, but is an option.

Stops and Stop Strategy:

I like to keep this bit simple, but never mechanical and with respect to levels in the market. My rule of thumb is to place the stop below/above the the bar preceeding the signal bar, this can range from 20 pips to 40 pips or more.

I always move my stop to Breakeven at 15 pips, this is a hard and fast rule for me. If price movement is stagnant I will manually trail the stop at variable intervals, completely depending on how the market is moving. But I definitely adhere to the breakeven(+1) rule very strictly in order to avoid the losing trades.. which do happen. You can do this however you deem fit. If the market is accelarating very quickly, I will just move the stop to +30 and let it ride until I have a CCI exit.

http://i10.tinypic.com/6xahoox.jpg

Best signals generated during late NY session.. but this isnt a hard rule. I am watching the market many many hours every day and take the signals as they come. You do not get 20 signals a day.. you get sometimes 1 sometimes none sometimes 4.. These pairs will on a general note produce signals at the same time

they should sticky this @ www.forex-tsd.com where its infested with attention whores and childish exuberance

...

Yep

UPDATE: Stopped out for a breakeven, divergence formed on the 14 CCI.

Finally someone who shows a system they use in real life.....

.

Hi Bob,

Would this method of trading work on 5 or 1M time frames for scalping. Is this CCI indicator reliable on small time frames. You've got a good method here. I read a lot of information about CCI on Woodies web site. Thanks....T-Wolf

Thanks for the system bobblong, I've been using it all day but only after I went long on a G/J so I was quietly hoping your last pick wasn't 'too' accurate.
I'm looking at the 4h though but if you look at a bit more history on the 15m you can see that there were larger previous major higher highs and lows and when the entry signal came up the price was in the later part of the down move/pull back.
Studying the earlier entry signal long at 14.30gmt would have been profitable though, nice one.

This works just fine on a 5 minute charts, but the rules are just the same and must be followed very strictly i.e trade on the correct side of the moving averages, be aware of levels in the market and take the best ZLR's when the 50 CCI shows strong momentum in your direction. Trade at your own risk
I haven't tried it on 1 minute charts... let us know how it goes, it should theoretically work exactly the same.




Bob

Indeed this was a later stage of the pullback, but this should not stop anyone from taking a trade if the conditions are met, they were not met previously during this pullback, so I am pleased that I adhered to my rules.. that warm fuzzy feeling you know

Can you post a chart of this signal on 14:30gmt?

Bob

This is how I see it for a long, is that correct? I would have exited at the line at 01.15 (a reversed signal if you like).

In fact, looking at the chart now I might even enter earlier at the CCI50 cross over -50 and the 14 over 0 given the prevailing longer term trend and it's setting up again