About the CCI Indicator
The Commodity Channel Index (CCI) indicator for MT4, developed by Donald Lambert, is a versatile oscillator that helps traders detect overbought and oversold conditions as well as divergences between price and momentum.
It typically fluctuates between -100 and +100, with values beyond these extremes signaling strong price deviations.
Traders often combine CCI with a trend-following tool, such as the 200-period exponential moving average, to filter trades in the direction of the overall trend.
By doing this, CCI signals are more reliable and can reduce false entries.
The indicator is suitable for all currency pairs and can be applied on multiple timeframes, from M5 scalping setups to daily swing trades.
Green signals occur when CCI moves back above -100 from oversold territory, suggesting a buy in an uptrend.
Red signals occur when CCI moves below +100 from overbought territory, signaling a sell in a downtrend.
This combination of trend and oscillator signals helps traders time entries with higher probability setups.
Free Download
Download the “CCI.mq4” MT4 indicator
Key Features
- Oscillator that fluctuates between -100 and +100, with extreme readings above/below these levels.
- Highlights overbought and oversold conditions for trading opportunities.
- Supports divergence detection between price and CCI.
- Combining with a trend indicator improves signal reliability.
Indicator Chart
The chart displays the CCI indicator in a separate window below the main price area.
Green signals appear when the oscillator rises from oversold levels, suggesting potential buy opportunities.
Red signals appear when the oscillator falls from overbought levels, signaling potential sell opportunities.
Traders use these signals along with the 200 EMA to align entries with the trend.
Guide to Trade with CCI
Buy Rules
- Confirm the trend is up using the 200 EMA.
- Wait for the CCI to cross back above -100 from oversold territory.
- Enter a buy trade when the signal aligns with the uptrend.
- Focus on trades where price shows momentum off the oversold area.
Sell Rules
- Confirm the trend is down using the 200 EMA.
- Wait for the CCI to cross back below +100 from overbought territory.
- Enter a sell trade when the signal aligns with the downtrend.
- Focus on trades where price shows momentum off the overbought area.
Stop Loss
- For buy trades, place the stop below the nearest support or recent low.
- For sell trades, place the stop above the nearest resistance or recent high.
- Adjust the stop for volatility using ATR if needed.
Take Profit
- Exit buy trades when CCI approaches +100 or shows signs of exhaustion.
- Exit sell trades when CCI approaches -100 or shows signs of reversal.
- Alternatively, use a fixed reward target in line with risk.
CCI Indicator and Trend Envelopes Forex Scalping Strategy
This MT4 scalping strategy combines momentum reversal signals with trend direction using the Commodity Channel Index Indicator and the Trend Envelopes Indicator.
The CCI helps identify oversold and overbought conditions, signaling buys when it crosses back above –100 and sells when it crosses back below +100.
The Trend Envelopes indicator defines trend direction with a blue line below the candles for bullish trends and an orange line above the candles for bearish trends.
Using both indicators together helps align entries with the prevailing trend and momentum shifts, making this effective for scalping on M5 and M15 charts.
Buy Entry Rules
- Ensure the Trend Envelopes line is blue and positioned below the price, indicating a bullish trend.
- Wait for the CCI to cross back above –100 from below, signaling a rebound from oversold conditions.
- Enter a buy trade at the close of the candle where CCI crosses –100 from below.
- Place a stop loss below the recent swing low or the Trend Envelopes line.
- Take profit when the CCI crosses back below +100 or shows signs of losing strength.
Sell Entry Rules
- Ensure the Trend Envelopes line is orange and above the price, indicating a bearish trend.
- Wait for the CCI to cross back below +100 from above, signaling a turn from overbought conditions.
- Enter a sell trade at the close of the candle where CCI crosses +100 from above.
- Place a stop loss above the recent swing high or the Trend Envelopes line.
- Take profit when the CCI crosses back above –100 or momentum weakens.
Advantages
- Filters trades to align with both trend direction and momentum reversals.
- CCI provides early signals for potential reversals at key overbought/oversold levels.
- Trend Envelopes allow traders to focus on the dominant market direction.
- Helps avoid taking trades against strong market trends.
- Dynamic entries and exits can maximize scalping opportunities and capture short-term moves.
- Combining indicators reduces the likelihood of random, low-probability trades.
- Works well during active market sessions for consistent trade opportunities.
- Supports both quick scalps and slightly longer intraday moves.
Drawbacks
- CCI cross signals can lag slightly in fast-moving markets.
- False signals may occur when the market is choppy or range-bound.
- Trend Envelopes may flip quickly in volatile conditions, leading to whipsaws.
- Signal frequency can vary depending on market momentum strength.
- Some pairs may produce fewer quality setups due to low volatility.
Example Case Study 1
On GBPUSD M5 during the London session, the Trend Envelopes line was blue and below the price, indicating an uptrend.
The CCI dipped below –100 and then crossed above –100, signaling a buy.
A buy trade was entered at candle close with a stop loss below the most recent swing low support.
Price moved upward and the trade was closed when CCI crossed back below +100, producing a 21 pip gain.
The combination of trend and momentum confirmed a strong scalp.
Example Case Study 2
On USDCHF M15, the Trend Envelopes line was orange and above the price, indicating a bearish trend.
The CCI climbed above +100 then crossed back below +100, signaling a sell.
A sell trade was entered at candle close with a stop loss above the most recent swing high.
Price moved lower and the trade was closed when CCI crossed above –100, resulting in a 35 pip profit.
Aligning trend direction with CCI reversal timing helped capture the core of the move.
Strategy Tips
- Confirm the broader trend on a higher timeframe before taking scalping trades.
- Use additional support and resistance levels to validate entry points.
- Maintain strict discipline with stop loss placement to protect capital on rapid reversals.
- Consider scaling out partial positions when price reaches intermediate targets.
- Focus on trading during active hours like the London and New York sessions for better liquidity.
- Adjust trade size according to the volatility of the pair being traded.
- Keep a log of CCI and Trend Envelopes setups to track which pairs are most responsive.
- Avoid entering trades immediately after a prior signal if market momentum is weak.
- Use alerts or notifications for CCI crossovers to never miss potential setups.
Download Now
Download the “CCI.mq4” Metatrader 4 indicator
FAQ
Do I need to combine CCI with a trend indicator?
Yes, using a trend filter like the 200 EMA increases the accuracy of buy and sell signals and avoids countertrend trades.
Can this indicator detect divergences?
Yes, CCI can help spot divergence between price and momentum, signaling potential reversals before they happen.
Which timeframes work best?
Shorter timeframes suit scalping and intraday trading, while higher timeframes are better for swing trades and trend-following setups.
Summary
The CCI indicator for MT4 helps traders identify overbought and oversold market conditions while combining with a trend filter like the 200 EMA ensures trades follow the dominant trend.
Its flexibility across currency pairs and timeframes makes it suitable for scalpers, day traders, and swing traders.
By focusing on momentum extremes in line with the trend, traders can enter high-probability setups and improve timing for entries and exits.
