PRIVATE FOREX TRADING FIRM
Cevntun Trading Partners
Incorrect position 1
The Signal
The Third Component of the Trading Strategy
The Signal appears naturally at the same time as the Retest peak is formed. The CCI oscillator MA line draws it automatically at the turn of the new candle.
The image shows the CCI indicator MA line is in the correct position for the trading strategy
When a candle ends and a new candle begins is when the Retest peak is formed by the CCI indicator MA line. The CCI Ma line must be in this position to make the third component of the trading strategy
The other two possible positions that the indicator line will open in are at the turnover time. They are shown below.
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Image 1 shows the MA line continuing upwards.
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Upwards is any position from just above the right angle to straight up.
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While image 2 shows the MA line at right angles.
Statistically the position of the indicator at the turn of the candle is normally correct as to the way price action will continue, at least for the next candle. So when the CCI MA line is pointing in the upwards position price usually continues to rise.
When the CCI indicators MA line is at right angles as in image two this is a sign of indecision in the market and price can go either way at the drop of a hat. Although very rarely it is possible that price action may continue going across for another candle before then changing directions.
I must point out a major caveat to this statement and this is the problem of divergence. Divergence is one of the factors that effect this strategy from time to time. Prices can be rising or falling as indicated by the candles but the oscillator is going in the opposite direction.
Having said that, it should be noted the direction of the CCI MA line at the turnover is not a Golden Rule and it is possible that the position could change directions to form a Retest peak at any time throughout the duration of the current candle. Should this occur there is no reason why a trader cannot trade these position if this happen. But to avoid confusion for the moment while you are just learning, we will concentrate solely on trading the correct positioned peak from the beginning of the new candle.
Incorrect position 2
Incorrect position 1