Using the CCI to confirm entries on shooting star-like candles
Trading the candlestick pattern of the shooting star, hammer, kangaroo tail, or whatever name you want to use for it can be profitable. As a "naked" strategy, it does not yield very many entries on the daily charts but it can be useful for intraday trades. A common simple setup for a short on this candlestick pattern is to place your entry just below the low with a stop loss just above the high and a take profit at the next support/resistance zone. For a long position, one would simply invert the positions.
I have back tested this strategy and found it to have a win rate in the 60-70% range across various currencies. In an attempt to increase the win rate, I looked to the Commodity Channel Index to find confirmations of price action. Using the defaults for the CCI, I've modified the trade setup to require that the CCI be above 100 for short positions and below -100 for long positions. This obviously yields fewer entries but at the moment, very brief backtesting is showing a higher win rate. I need to backtest this strategy further before I am comfortable with it but I am pleased with the current results.
Prior to settling on the CCI, I considered using the RSI instead but I have found that the CCI produces tighter results. I hope to strike a balance between number of trades taken against the win rate for the strategy.
Happy new year, traders! I hope 2023 is profitable for you!
I have back tested this strategy and found it to have a win rate in the 60-70% range across various currencies. In an attempt to increase the win rate, I looked to the Commodity Channel Index to find confirmations of price action. Using the defaults for the CCI, I've modified the trade setup to require that the CCI be above 100 for short positions and below -100 for long positions. This obviously yields fewer entries but at the moment, very brief backtesting is showing a higher win rate. I need to backtest this strategy further before I am comfortable with it but I am pleased with the current results.
Prior to settling on the CCI, I considered using the RSI instead but I have found that the CCI produces tighter results. I hope to strike a balance between number of trades taken against the win rate for the strategy.
Happy new year, traders! I hope 2023 is profitable for you!
I'm not so sure that adding the CCI is a good idea. The win rate for just the candlestick pattern was 65.66% and the win rate when adding the CCI is 57.58%. There were fewer entries with the CCI as well. If I were using the daily charts with the CCI, I'd average around 2 trades per month.