This is the CCI below of the 5-minute chart that is equal to the time or duration of 1 day. It starts to smoth out the ruggedness of the 1-minute chart.
Below is the same time-fram as the other 2, CCI for the 10-minute chart.
Now, lets make a trade off of the Divergence Trade of 3's. See chart below. I will then make notes on the 10-Minute CCI about the trade.
Ok, so at 10:35 we got our short trade confirmation. Now lets take a look at the 3-day (5-minute) chart for the other criteria which is what type of trade are you doing. I'm going to get into major detail about the other types of trades, but this one is a trade at the battle of the fibs. I had a bearish view of the overall market so I would want to get into a short position somewhere at the fib. This is the highest risk type of the 3 trades, and i'll explain that in more detail after the 10-minute is posted. See the chart below to see where this entry fit into the 3-day chart.
So, now we got the 5-minute chart and the entry point which is the battle at the fibs. Notice looking at the CCI were no very overbought on this trade. It is even clearer on the CCI 10-minute. (see below). We entered into a short position a little above 0 on CCI. You can make a profit but is not like the other ones were you enter a posittion where your in overbought/oversold conditions. If you notice on the CCI post below, were entered around 30 on CCI. The trade is based off of getting to the -100 break on the CCI. If you read CCI trade strategies, a trade can be make from entry of -100 and exited once -100 breaks again. This is completely bunk in my book. This is a very dangerous trade, i'm would be betting that we have a whipsaw in CCI which happens, but scary nonetheless. In addition, Once CCI breaks -100 we want to exit the position at the peak of the CCI on the 3rd longest-term chart by using the 1-minute chart (in this case) to exact an exit.
If we got a new high with the bullish divergence I would consider the trade failed and exit. I know this sounds crazy, because a new high is very explainable on a correction wave "C". What I have found that the risk of holding past bullish divergence (in this case of short) is not worth the risk. When you have a battle of the fibs and a new high/low occurs without divergence in the opposite direction your left with about a 20-30% change of still making money. It's simply not worth it.
So let now take a look at when to exit this position. Lets move back to the 1-minute chart.
Noticed that we would of exited this trade @1:15 and if you look at the CCI from the 10-minute chart we exacted the low. Now this sounds great and all but very often (most times) we get another weak new low where the CCI will cross -100 (in this case) but does not = the low of the last CCI. This is very common and it is what the strategy is based on. That new CCI break on opposite divergence help establish a long position in this case.
The thing you should of gotten from this is that, you have to be looking at 3 charts at the same time. This wraps up CCI as an indicator and I will tie more in later and I will use the other type of trade which is a break off of oversold/bought conditions where we get to the other extreme oversold/bought condition.. this is where the real money is. Hope this helps!
If you have comments or questions please go to the home page here (link below) to do that. Thanks!
