In this article we will learn about how to trade with CCI indicator or Commodity Channel Index Indicator. This trading strategy is using reversal Bar candlestick pattern as a entry system. But, before we learn about CCI indicator trading system, let us take a look at the CCI indicator first to know why we use this indicator for our trading strategy.
Donald Lambert made the CCI technical indicator to determine market price reversal. This indicator gives overbought and oversold signals to assist forex trader in their trading activities. If the Commodity channel index technical indicator trades above +100, it means a bullish trend and the level +200 would be the overbought zone. And if the Commodity channel index technical indicator trades below -100, it means a bearish trend and the level -200 would be the oversold area.
Reversal bar chart pattern
If we look at the trading chart above, The potential trend reversal is showed when the Commodity channel index technical indicator has touched the +200 or -200 level as overbought or oversold area.
But the Commodity channel index is not good enough as a stand alone trading indicator, this indicator needs other tool as confirmation or support. And in this trading strategy we use reversal bar chart pattern to help our trading strategy.
This reversal bar chart pattern becomes helpful if we are trading on a smaller period like 1 hour trading chart or 4 hour trading chart. in our trading strategy we use reversal bar chart pattern as a trend reversal signal.