Many successful trading systems are based on standard MT4 indicators. Woodie’s CCI is based on 2 indicators: a commodity channel and a modified moving average. The work is being carried out on a set of patterns, so there can be no double interpretation of indicator signals.
At one time, the author of the indicator, Ken Wood, gave it away for free. Now the basic version of the indicator is in the public domain, while Wood himself switched to working with Renko charts , constantly improving his trading strategy . The latest versions of the tool are unlikely to be available for free, but Woodie’s CCI basic indicator still works fine.
Installing and configuring the Woodie’s CCI indicator
For the convenience of traders, all used indicators in the system are combined into 1. To install both files, place them in the Indicators folder and restart MetaTrader4.
Initially, the indicator was developed for trading CFDs on small timeframes (within 1-3 minutes). Later, traders proved from their own experience that the system works and makes a profit at other time intervals.
After adding to the chart, you will see the following picture.
Everything is ready to go.
- Black thick line – corresponds to the CCI indicator with a period of 14, trading is carried out using it.
- Thin green line – Turbo CCI with a period of 6;
- LSMA (Least Square Moving Average) is not displayed on the chart, but it is used in work. The color of the dotted line at the level of the zero line corresponds to the position of the chart relative to it.
- The color of the histogram indicates how long the Commodity Channel Index has been below or above the chart. The CCI must be above or below the zero level for at least 5 Japanese candlesticks for the histogram to turn blue or red. The color of its bars indicates the direction of the trend line .
- The bar next to the color of the histogram is highlighted in yellow on the histogram.
Woodie’s CCI indicator information window.
An information window is displayed on the right side, it displays (from top to bottom):
- 1 – day high and at what distance from it the chart is now.
- 2 – indicates the delta between the current and previous Woodie’s CCI bar (right number), the current, and the third one (left number).
- 3 – CCI on the last two candles.
- 4 – at what price the current candle was opened.
- 5 – the Pivot level (closest from the top) and the distance to it is signed. In our example, the chart is below the R1 level at a distance of 320 points.
- 6 – High price of the last two candles, the right number corresponds to the current candlestick, the left one – to the previous one.
- 7 – price value.
- 8 – Low price of the last two candles.
- 9 – in the picture above, this field is empty. The name of the Price Action pattern is displayed here when it is formed.
- 10 – how much is left before the candle closes.
- 11 – the nearest Pivot level is displayed here, as well as the distance in points to it.
- 12 – the minimum of the day and at what distance from it is the Open price of the current candle.
Trading can be carried out both with the trend and against it. Ken Wood himself warned that at the initial stage it is better not to work against the market.
Woodie’s CCI entry points
All entry points can be divided into 2 categories – for trading with the trend and against it. We will analyze each of them in more detail.
Trading with the trend
Here we include:
- Break of the trend line in the direction of the mainstream . It is possible to draw lines according to Woodie’s CCI according to the extremes of the usual CCI and Turbo CCI. It is desirable that the extremes be in different zones of the commodity channel index. If during the formation of the pattern, the Woodie’s CCI line crossed the zero level, this reduces its value.
Trend Line Break pattern (breakout of the trend line).
- Break of the horizontal line in the direction of the trend. It differs from the previous pattern only in that the extremes on the Woodie’s CCI indicator are at approximately the same level. It is rarely formed and is not considered particularly strong.
Horizontal Line Break pattern (breakout of the horizontal line).
- Rebound from zero level. The most common pattern in strategy. Woodie’s CCI line approaches zero and immediately reverses, forming a hook. In the basic version of the vehicle, it is allowed to take situations when there is a throw behind the zero line or not reaching it within the ± 50 levels.
Rejection of the zero line (Zero line reject).
- Reverse divergence – the pattern looks like a regular divergence . It is only necessary that the trend confirmation is received on Woodie’s CCI, and the extremes of the commodity channel index are on opposite sides of the ± 100 levels.
Often, patterns form at the same time, reinforcing each other. In the figure above, 3 patterns were formed at once for entering along the trend, as a result, the signal worked out.
Trading against the trend
There are more patterns here, but some of them are quite difficult for beginners to identify. That is why Wood recommends switching to trading against the market after you have mastered Woodie’s CCI indicator in the direction of the trend.
There are 6 patterns:
- The breakdown of the horizontal line is an analog of the trend pattern with the only difference that we will work against the trend. In a growing market, the horizontal line is built on the lows, on a falling market – on the Woodie’s CCI highs. The market entry is performed on the line breakout towards the zero level.
- Breakout of the trend line is another clone of the trend pattern. As in the case of the previous model, we will work against the current trend.
- Hook from the extreme zone – looks like a short-term cast of Woodie’s CCI line in the ± 200 area and a quick reversal in it. It is not worth trading only on the basis of this pattern, it is too unreliable.
- Famir – it can be called a false rebound from the zero line. The CCI line approaches the zero level, a rebound from it is formed and at the next candlestick the pattern “breaks”, the zero levels is crossed. If you entered into a position on Woodie’s CCI rebound from the zero line, after the formation of Famir, you must immediately close it manually and turn over, that is, open a position in the opposite direction. Use the position of the chart relative to the moving average as an additional filter (that is, pay attention to the color of the dotted line). If the chart crosses the LSMA during the formation of Famir and is fixed behind it, then the counter-trend pattern is strengthened.
- The ghost is head and shoulders but formed on Woodie’s CCI line. It is desirable that this model be formed in the area of extremes on the CCI commodity channel index. The entry, as in the classic technical analysis pattern, is performed when the chart breaks the neckline.
The ghost is the same head and shoulders, but is plotted directly on the indicator line.
- Vegas is not the most common pattern. First, the CCI Commodity Channel Index should go to the extreme area beyond the ± 200 level. Then there is a smooth movement of the line to the zero level (at least an entry into the zone of ± 100 or ± 50 should take place). Rounding is formed here, this is an attempt of the chart to continue the current trend. When this attempt fails, the horizontal line drawn through the base of the rounding is broken at that point and the market is entered.
When should you close a trade?
Wood’s system is a pure scalping strategy . It is better not to set a fixed TP here, but to exit the market according to the Woodie’s CCI indicator. Several conditions for exiting a position can be highlighted, they are applied regardless of which pattern was used to enter the market.
The deal should be closed if:
- There was a crossing of the zero line against an open trade. For example, a sell deal was opened, and the CCI crossed the zero level from the bottom up. Among the shortcomings, we note a significant delay in the signal, which can cause the loss of part of the profit.
The application of this rule resulted in a loss of about half of the possible profit.
- A hook is forming on the Woodie’s CCI indicator, or the line of the CCI Commodity Channel Index is moving flat . The first situation indicates a possible reversal of the trend, and the second – about the uncertainty in the market. In both cases, it is better to close the deal with the profit that you already have and wait out this period.
Exit the market after a flat on CCI.
- Break of the trend line against an open trade. It gives an exit signal with a slight delay and with a high degree of probability, you will exit the market at the optimal price.
The purchases are closed almost at the high using this rule.
- Turbo CCI crosses the heavy CCI line. Due to the shorter period, the TCCI responds faster to changes in chart behavior and can indicate an impending reversal faster.
Exit at the intersection of the fast and slow CCI allowed the trade to be closed at the high.
- Moving the schedule to the other side of the LSMA . This is evidenced by the change in the color of the dotted line of the zero line, the criterion for closing a deal is not bad, but not ideal. If the chart is in a flat state, that is, the color of the dotted line changes almost on every new candlestick, then you should not use it. In other cases, this technique quite accurately indicates a change in market priorities.
Profit taking at the moment the chart moves to the area above the LSMA. This is indicated by the change in the color of the dotted line to green.
Ken Wood himself prefers high-speed trading. His philosophy is to take a small profit from the market as quickly as possible and close the deal . He trades on 3-minute charts and does not hold trades for hours and days like the average trader.
Trading in MT4 is the same as it is problematic, this timeframe is not included in the standard. However, practice shows that Woodie’s CCI works well at other time intervals. Now interest in the strategy has slightly decreased, but this is due solely to its age, Woodie’s CCI’s efficiency remains good.
Woodie’s CCI is a time-tested indicator. It really works, despite the fact that it is built on well-known standard trading instruments . All materials on it and indicators are freely available, so if you are still looking for your vehicle, we recommend that you familiarize yourself with it.
It is impossible to recommend everyone, without exception, to work in the same way as Wood, because his style is too specific. However, the basic principle remains. TC Woodie’s CCI cannot predict market behavior in the medium term. The signals of this system are processed quickly and, as a rule, give a relatively small profit. Our goal is not a trend movement, but an impulse that appears after the TS signal.