In Nimblr TA, Pull Backs are discussed with Commodity Channel Index (“CCI”) Indicator as supporting tool.
Let us begin with understanding parameters of CCI used here:
CCI: Used with two parameters i.e. Time Frame and Period
Period: It pertains to no of candles in count.
Time: It is measured in minutes, hours, weeks, months, days, yearly.
Let us now understand few commonly used CCI indicators:
- CCI 34 30 min: it means the number of candles it considers is 34 and period of each candle is 30 min
- CCI 34 5 min: it means that the number of candles it considers is 34 and the period of each candle is 5 min.
- CCI 8 5 min: it means that the number of candles it considers is 8 and the period of each candle is 5 min.
Note: We differentiate 5 min period as a Lower Time Frame and 30 min as Higher Time Frame for Intra Day Trading.
“Notes written below are purely observational and they can be further studied as per few mentioned websites towards the end.”
Below is an illustration of the above discussed time frames and periods (Fig.1)
Let us focus more and understand how the aforementioned parameters look like in Multi Frame Time Chart as shown below in Fig.2
It has three CCI Lines (refer fig.2):
- CCI 8 5 min: Yellow
- CCI 34 5 min: Blue
- CCI 34 30 min: Red
Observe the thin yellow line oscillates the most as it is on Lower Time Frame of 5 min and period 8.
Followed with lesser oscillating CCI 34 5 min and least oscillating CCI 34 30 min. The chart time frame is on 5 min.
Observe the lines above zero of 60, 100,135 and 175 and below zero of -60,-100,135 and -175.
We classify price movements under following trades:
- Momentum Trade
- Pullback Trade
- Reversal Trade
In such trades for which CCI 8 5 min is instrumental, we call them Momentum Trades on Intra Day. As, apart from CCI 34 30 min>100 condition, they also satisfy breakout above day’s Open Range High.
Let us refer to Fig.3 which has CCI 8 5 min chart:
This is the one, we use to Enter and Exit a trade provided some conditions are true.
General Rule for CCI 8 5 min in Momentum Pullback Trade or other conditions taken up later are:
- CCI 8 5min Buy/Long if < -135
- CCI 8 5min Sell/ Short > 135
This is a Cardinal Rule is used to Enter a Buy trade, when <-135 and Exit or Book Profits when >135 to complete or close the trade.
Similarly, Enter a Sell trade when >135 and Exit or Book Profits when <-135.
Pullback Trades are best to add positions to your earlier entry and also called a Pyramiding trades.
In such Pullback and Pyramiding trades, the original trend of underlying is highly bullish or bearish.
In ascertain this bullishness and bearishness, we move to observe CCI 34 30 min which determines our trade direction to trade.
If CCI 34 30 min is >100 or just breaks out above 100 it is said to have gathered Bullish Momentum.
The Cardinal Rule that must support the Entry as per CCI 8 5 min is concurrently CCI 34 30 min must be:
Buy/Long if > 110
Sell/Long if <-110
Both collectively, the Conditions for Pullback & Pyramiding Entry are:
CCI 8 5 min < -135 provided CCI 34 30 m >110
CCI 8 5 min>135 provided CCI 34 30 min < -110
Such trades for which CCI 8 5 min is equally instrumental as ever.
We call them pure Pullback Trades on Intra Day because they do not need occurrence of Breakout above Days Open High apart from CCI 34 30 min>100 condition of Momentum.
All other conditions and process mentioned before remains same except for the location of Pullback Entry can be prior to Breakout.
With his we complete Role of CCI 8 5min in Pullback Entries and Pull Back in general and move on in the next blog post to the Role of CCI 34 5min in Staying in the Trade.
How traders use CCI?
Commodity Channel Index
Multi Time Frame
Chartilink Screener for Intra Day Buy/Long
Chartlink Screener for Intra Day Sell/Short
Chartlink Screener for Investment Buy Pullbacks