Last updated: May 15, 2025

CCI Forex Swing Trading Strategy

CCI or Commodity Channel Indicator was introduced by Donald Lambert in 1980. Though its name refers to commodities but it can be used in equities and currency as well. This indicator measures the statistical variation from the average. It is an unbounded oscillator that generally fluctuates between +100 and -100.

CCI is used for retracements, on breakouts and divergent trades. We have to focus more on divergence.

Trading CCI in Divergence:

Identify the direction of the trend. If you are trading off on a 4-hour chart, determine the direction of the daily trend. If you are trading off a 15-minute chart, determine the direction of a trend on the 1 hr chart etc. We are doing this because you want to take trades based on the direction of the main trend when you are trading in smaller timeframes.

Important points:

Overbought: CCI is above 100 value.
Oversold: CCI is below the -100.

Overbought or oversold indicators means that there is a high probability that the price will correct to more representative levels. A retracement trader will wait for the cross back inside the range before initiating a position.

Buy Entry:

1. CCI value must go below -100 or oversold region. It must come back and crosses above the -100 line.
2. Place a buy stop order 3-5 pips above the high of the candlestick. after it will close.
3. Place stop loss below the swing low or below the low of the candlestick if the candle is quite long.
4. Take profit at around 2 times the distance of what you risked.

Sell Entry:

1. CCI value must go above 100 or overbought region. It must come down and will cross below the +100.
2. Place a sell stop order 3-5 pips below the low of the candlestick.
3. Place the stop loss at the swing high or 5-10 pips above the high of the candlestick if the candlestick is quite long.
4. You can take profit of 1:2 risk and reward ratio.

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