This strategy focuses on identifying market trends using long-term moving averages as primary indicators, while incorporating CCI and RSI as additional filters. This combination helps determine more precise entry and exit points, enabling traders to capitalize on strong trends while minimizing exposure to weaker signals.
For detailed trade entry instructions, please refer to the accompanying video demonstration.
While I haven’t personally tested this strategy, I would recommend using trailing stops and setting specific profit targets when implementing it. As with any new trading method, it’s crucial to first practice in a demo account to evaluate its effectiveness and determine if additional indicators or rules might enhance performance.
Disclaimer: I am not a financial advisor. This information is for educational purposes only and should not be considered a recommendation to buy or sell any financial instruments
In this video they are using the TradingView platform.
Trading View  They have wonderful technical analysis indicators and charts and can be used with many different brokerage companies.Â
Key Components of the Strategy
1. Exponential Moving Averages (40 and 80 Periods)
The 40 and 80-period exponential moving averages are used as trend identifiers:
- 40-Period Exponential Moving Average (Shorter Term): The 40-period moving average acts as the faster line and is more reactive to recent price changes. It offers a sense of medium-term price action and helps in spotting more frequent shifts in direction.
- 80-Period Exponential Moving Average (Longer Term): This acts as a slower, more stable line, smoothing out price action over a longer period. When the price is above this average, it suggests a bullish trend; when it is below, it indicates a bearish trend.
2. Commodity Channel Index (CCI)
The CCI, developed by Donald Lambert, is an oscillator designed to spot overbought and oversold conditions. Here’s how it works in this strategy:
- Signal for Overbought (+100): A reading above +100 implies the asset may be overbought, and a potential trend reversal could be near.
- Signal for Oversold (-100): A reading below -100 indicates an oversold condition, suggesting a potential buying opportunity if the overall trend is bullish.
In this strategy, the CCI helps filter entries. For example, you might only enter a long position if the CCI is above -100, or go short if the CCI is below +100, depending on the trend direction.
3. Relative Strength Index (RSI)
The RSI, developed by J. Welles Wilder Jr., is another oscillator used to gauge the strength or weakness of price movements on a 0-100 scale:
- Overbought (Above 70): Values above 70 indicate overbought conditions, signaling potential price reversals in a bearish direction.
- Oversold (Below 30): Values below 30 suggest oversold conditions, possibly indicating an upward price reversal.
In this strategy, the RSI is also used as a filter, complementing the CCI. When entering a position aligned with the moving average trend, the RSI should ideally be between 30 and 70. This ensures the asset isn’t extremely overbought or oversold, reducing the chance of entering at a trend’s peak or trough.
Strategy Setup and Rules
- Identify the Trend with Moving Averages:
- When the 40-period MA is above the 80-period MA, look for long (buy) signals.
- When the 40-period MA is below the 80-period MA, look for short (sell) signals.
- Confirm with the CCI Filter:
- For a long position, the CCI should be above -100.
- For a short position, the CCI should be below +100.
- Confirm with the RSI Filter:
- The RSI should ideally be between 30 and 70 to ensure you’re not buying into overbought territory or selling in oversold territory.
- Entry and Exit Points:
- Watch the video for more info.
Limitations and Considerations
- Sideways Markets: In range-bound or low-volatility markets, this strategy might produce fewer valid signals, as moving averages perform best in trending environments.
- Delayed Signals: Using two moving averages can delay entry and exit points, potentially missing the beginning or end of a trend.