The CCI EMA strategy you will learn about today is a simple structure that will allow you to effectively take advantage of an existing trend in the market. Trade with the trend, you can often hear. This is a good piece of advice, really, because trading along with the trend can not only provide many profitable opportunities but it is also a safer option than trading against the current trend. In order to open a position, you have to identify the trend first and then find the good point to open a transaction. Today I will present a method of doing it which combines two indicators, the Exponential Moving Average and the Commodity Channel Index.
Chart preparations for CCI EMA strategy
The first thing you have to do is to log in to your IQ Option account. Next, you should consider what type of asset you are going to trade during the session. Choose the type and the timeframe of your chart. Then, add the indicators needed.
Click on the Indicators icon and add moving average and CCI. The moving average will need some adjustments. The CCI will use default settings.
The EMA period should be set for 50 and the CCI for 14.
The CCI EMA strategy
Opening the long position with CCI EMA strategy
You are trading along with the trend. That is why you will look for opportunities to open a long position during the uptrend. To identify the uptrend you should look at the candles and the EMA. The candle should cross the EMA line and close above it. This gives you a hint there is an uptrend in the market.
Now, you are waiting for the signal from the CCI oscillator. Its line should cross the line of value 100 to the top. Hold the position opened for the length of 3-4 candles.
You do not open a new position until another crossing of the candle and the EMA takes place even if the CCI is above the 100 line.
Opening the short transaction with CCI EMA strategy
To open a short transaction you want the market to be in the downtrend. To assure this is the case, check whether the candle crosses the EMA and closes below it.
The signal from the CCI is obtained when the line of the oscillator crosses the -100 line on its way down. Enter the short trade and keep it open for 3-4 consecutive candles.
How do traders use the CCI?
Most often the CCI is used to identify overbought or oversold zones. The market is said to be overbought when the indicator line is above 100 or 200. Conversely, the market is said to be oversold when the indicator line is below the -100 or -200 line. You will have noticed that our strategy gives a sell signal when the indicator line enters the oversold area. This is how it should be. The market is never oversold to the extent that it cannot continue to fall and never overbought to the extent that it cannot continue to rise.
In addition, it is also possible to detect divergences on the CCI. Our strategy today does not use it, but it is worth observing this phenomenon on the CCI because divergences give additional information on possible future market scenarios.
Which indicator works best with CCI?
The Commodity Channel Index is an oscillator. Oscillators generally work well with moving averages. We chose the EMA, but similar results can be obtained by combining the CCI with the SMA or other moving averages.
The trading strategy with the use of the EMA and the CCI is quite simple. You just need to observe the EMA in order to identify the trend and then wait for the signal from the CCI which comes when the 100 (or -100) line is crossed.
You can experiment with different periods settings. You should increase the EMA period when using the shorter timeframes. The best is to leave the CCI period at 14, however, you can also try different ones. Do not exceed, however, the value 24.
IQ Option has a free demo account in its offer. You can practice there any new strategy or new settings for the well-known method. Come back whenever you need to. This is the place where you cannot lose your money because this account is supplied with virtual currency. Nevertheless, you cannot earn real money either. So shift to the live account when you feel ready.
Have you already used the CCI EMA strategy in your trading? Share your experience with us in the comments section below the post.
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