CCI Commodities Channel Index Breakout Strategy

Commodities Channel Index (CCI) is an oscillator that is widely used by traders to determine the overbought or oversold condition of the market cycle. It oscillates between the two extreme values of +100 and -100. A value below -100 means that market is oversold and a value above +100 means the market is overbought.

Commodities Channel Index breakouts occur when it falls below +100 or rises above -100. Most traders are taught to buy when the breakout from the oversold market takes place and sell when the breakout from the overbought market condition takes place. In this CCI Breakout Trading Strategy, we will be using a variation of this by combining the Commodities Channel Index Breakouts with our usual support and resistance on the Daily Charts.

Suppose the CCI Breakout takes place on the Daily Chart meaning the indicator falls below +100 or rises above -100. Place an Entry Order at the open price of the daily candle that caused the breakout. When a CCI Breakout takes place, the market often retraces to find enough interest amongst the buyers and sellers in the market to continue the breakout.

Usually this retracement occurs on the following day. So, expect to see your order filled on the following day. However, sometimes, there is enough momentum in the breakout to carry it forward without pulling it back to the opening price of the breakout candle for several days.

If this happens and your entry order doesn't get filled for the next let's say five trading days or the CCI oscillator again falls back to the overbought or the oversold condition, simply remove the entry order and wait for another trade. When using the CCI Breakout Strategy, you will get ample of hours before the entry order is filled by the market. You can utilize this time to think and plan your trade well using Fibonacci Ratios.

In the CCI Breakout Strategy, you will place the stop loss below the immediate low prior to the CCI Breakout or above the immediate high set prior to the breakout. In case of a trend, use Fibonacci Extensions and in case of a range use Fibonacci Retracement. Calculate your risk and reward and only enter into a trade if the Risk to Reward Ratio is less than 1:3 otherwise simply skip and wait for another trade to develop.

You can fist practice this CCI Breakout Strategy on your demo account. This strategy is ideal for part time traders who do regular jobs and trade in the evenings or in their spare time. Good Luck!