Trading Woodies CCI System by Jeff 

jeffandcci@yahoo.com    Copyright © 2004 Jeff Gannon  

Woodies CCI Club      The Mindset      The System      The Charts     The Trend     The Trade Entry And Exit    The Patterns      The Preparation For Your First Trade

The Trade Entry And Exit 

To predict is for slaves… To react is for kings!  We don’t guess at what the market will do. We use Woodies CCI system guidelines to take our trades.

Another incredible secret to Woodies CCI is that all of the entry and exit signals are well defined and very clear. All you do is react to these entry and exit signals. No thinking needed.

You will need to read through the entire document to fully understand the information being presented next so do not get too wrapped up in it. Just start getting used to the nomenclature. Do not get frustrated. Just read on through the document a few times. You will be fine.

Woodies CCI exit signals are the same for all Woodies CCI patterns. They do not change.

Let me repeat that. Woodies CCI exit signals are the same for all Woodies CCI patterns. They do not change.

The idea behind these exit signals is that when the trade momentum is starting to fade or the trade is starting to go against you then it shows you a signal to exit. The CCI shows you this. You do not need to think or guess or go into hope mode. Just follow the guidelines and your losses will be small. You don’t need to struggle to keep your losses small. Follow the guidelines and this is done automatically.

Do not predict what prices are going to do. We do not care. You should not care. And we do not want to see these types of comments posted in the room. It is nothing more than bias and useless guessing. We let the CCI tell us what price is doing. So should you.

Do not use small preset targets as your exit point. Use Woodies CCI exit signals as defined to exit your trade. There is even a rule to help you take some profits even if the CCI hasn’t signaled a pure CCI exit yet and we are at a very nice profit so don’t worry. If the market will only give you a small profit then that’s what Woodies CCI will give you as well. Just let Woodies CCI take it from the market. Some people do use order management tools that places a profit limit order set to what we call ‘home run’ targets worth anywhere from $300 to $500+ per contract and this is fine. However, let the CCI and Woodies defined exit signals take you out of the trade.

Don’t bother with the talk about risk/reward ratio target setting. This is mixing two types of trading methods and will not work while you are learning Woodies CCI system. Most that talk about it do not realize what risk/reward even means to a certain trade setup, not to mention how to find certain types of trade setups that will allow this type of trading. People love to talk about it because they think it’s as easy as just setting stops at say a value of X and setting a target at 2 times that amount. This is just absurd. Take what the market gives you. Focus on the CCI signals. Let Woodies CCI tell you when to enter and when to exit. You need to learn this first before you can be successful in trading Woodies CCI system.

In fact, this type of ratio target setting requires extensive knowledge about trading setups, markets movements and the trader needs to have price measurement abilities. It’s actually not hard, but few understand it. Furthermore risk/reward ratios are defined in terms of price. CCI does not show price directly and we do not look at price for our setups. Stop-loss orders are set in terms of price, not in terms 

of CCI movements so they can’t easily be used in this fashion when new to trading Woodies CCI. Until you no longer need this document just use Woodies CCI exit signals.

As mentioned before, always protect yourself with predefined hard stop-loss orders for safety.

Do not watch price bars. Do not focus on prices. Do not focus on the losses or gains of your trade after you enter. Follow Woodies CCI only. Let your hard stop-loss order protect you from any disaster.

Woodie has defined both the entry and exit signals for all CCI patterns. Only enter and exit on these signals.

There is no other way to enter a trade. Quit trying to make stuff up. It’s already defined. 

There is no other way to exit a trade. Quit trying to make stuff up. It’s already defined. 

When you enter a trade the CCI will no doubt wiggle around, flip back and fourth and up and down to some degree. You must remember that we are not in this trade forever. The CCI we use is based on a short period of time. You should expect to be exiting soon relative to the time frame you are using. Do not turn this into an investment and go into what Woodie calls “The Hope Mode.” Even if you just got in and the CCI bar flips against you then you will learn in this document that you will be exiting that trade at that moment. Be very clear on this point.

Before you ever start paper trading Woodies CCI you need to pick an appropriate type of trading style for you and your personality. These different types of trading styles are ‘very aggressive’, ‘aggressive’, or ‘conservative’. Pick your method now and stick with it. It is suggested that you use the ‘aggressive’ method. However, no one can choose for you. Paper trade all 3 styles over time and choose for yourself. It needs to fit your style. You will know the right one when you are trading it. Do not worry about this. However, once you choose an entry style then stick with it long term. Do not decide how you enter before each trade. This will not work.

The ‘very aggressive’ trading style means that you enter at the first hint of a setup. This is when the CCI bar has just flipped or turned into position to create a CCI pattern for the first time. This would be our entry if we choose this style. This style is not recommended.

The ‘aggressive’ trading style means that you enter the trade when the CCI bar has flipped or turned such that it forms a CCI pattern setup and is still in that position when there is 20 seconds left on count down clock. The idea is that with only 20 seconds left on the clock before the CCI bar prints it is highly likely that the pattern will still hold the same position or close to it for you when it prints on the chart.

The ‘conservative’ trading style means that you enter as soon as the CCI bar actually prints on your chart to form the CCI pattern and then moves on to start forming the next bar. This style is not recommended.

The conservative trading style not recommended even for new traders as CCI is a momentum indicator and that implies certain things. We need to take advantage of that momentum. When the CCI bar flips or moves into position it is indicating that there is a change in recent prior momentum and we need to react to capture that recent momentum. Waiting for the CCI bar to actually finish by printing can and will most 

often be too late to get a good entry when compared to just 20 seconds or so earlier. Simply put, the fact that the CCI bar went into position and that it has been there for the entire bar until the last 20 seconds is enough proof that the momentum is on our side. Even waiting for the 20-second countdown clock can be too long. But when compared to the bar close method it’s a much more reasonable choice. Nothing is guaranteed of course but if it turns on us we exit anyways so we are safe.

Having said that you could wrongly conclude that the very aggressive style would then be our best bet since momentum just changed or moved into position with that system. I wouldn’t argue but we want to have some sustained proof that the move is going to hold. I hope that you can see the aggressive approach is a nice balance between the two. However, whichever one you chose you must stick with it. Do not keep changing methods. This will not work. You cannot trade react fast enough if you are trying to decide which approach you want to take while you are watching the trade setup in front of you. That would be called thinking and we know that does not work.

Even though you are paper trading always, always, always use hard stops. It’s best to have these automatically placed at the time of your trade. These are the safety stops used just in case the market turns on you dramatically. That’s all they are used for. Ask what Woodie might use for hard stops-loss orders on a particular market.

For example for YM we might use 12+. For ER we might use 1.0+. For ZB we might use 4+ ticks for our hard stops. This depends on which market you trade and may not work every day as well as it did the day before. But it’s important to keep them the same from day to day. If you find these are too tight for the current day then stop trading and review your entries. Regardless of whether you are entering the trades correctly or the stops seem to be tight you can’t keep trading that particular day. Do not re-adjust your stops while trading for that day. The market will be back tomorrow. Again, talk to others about what stops Woodie uses.

Important! You do not wait for a trade to hit your hard stop-loss to exit. These are used as protection against events that can occur during trading that you cannot react fast enough to. If you let your trade be taken out by these stop-loss orders when trading then you will lose your account and you are not trading Woodies CCI system correctly.

You do wait for a CCI exit signal to exit your trade. Once you see that signal then exit your trade. You may have a profit or a loss. It does not matter. Do not focus on that. Just follow the CCI patterns, entry and exit signals. You will become a very good trader. Your profits will take care of themselves.

If you get stopped out before you see a CCI exit signal or before you can exit your trade then that’s fine. That is why the hard stop-loss order is set. Move on and wait for the next pattern to scroll by.

Woodie does not use the TCCI to enter a trade. Woodie uses the CCI pattern only to enter a trade. The TCCI is only used to help show divergence when the CCI isn’t, to help draw trend lines and as an early warning signal to exit a trade.

In regards to entry signals the TCCI is used as an early warning only. It lets you know that the CCI might be changing its direction and end up following the TCCI. Use TCCI as a warning only. Not as an entry signal.

If you want to wait for a trade entry signal until you get both a CCI pattern and a CCI confirmation signal as well then this is quite acceptable and works very well. Your trade entry style (i.e. very aggressive, aggressive or conservative) is still the same as far as how you enter the trade. You would just wait until you see both of these signals to occur together before entering the trade per your chosen style.

Also, you can choose to enter the CCI patterns with or without CCI confirmation signals. Adding CCI confirmation signals can add to the probability that the trade will be strong. The CCI confirmation signals are:

·        trend line break (TLB)

·        zero-line cross (ZLC or ZLX)

·        +/-100 CCI cross (100c or 100x)

These CCI confirmation signals, in order listed above, are when the CCI indicator line breaks through a trend line, crosses the zero-line and lastly crosses through the CCI +/-100 value on the chart. You will understand these better as you read on. The TLB confirmation signal is also used as a CCI trade pattern. Don’t let this confuse you. It can be used as both.

Some examples of a trade entry using CCI patterns and CCI confirmation signals are as follows:

·        zero-line reject (ZLR) and a zero-line cross (ZLC)

·        zero-line reject (ZLR) and a trend line break (TLB)

·        reverse divergence (rev diver) and a trend line break (TLB)

·        reverse divergence (rev diver) and a +/-100 Cross (100x)

·        ghost and a trend line break (TLB) and a +/-100 cross (100x)

·        vegas trade (VT) and a shamu and a zero-line cross (ZLC)

You can even have 3+ pattern/confirmation signals on the last two trade entries listed above. You would enter the trade on the last pattern/signal that develops in the combination. Regardless of the type of trade style you choose trading with confirmation signals is not necessary but it adds power to the CCI Pattern setup and will likely result in a higher degree of success in your trading.

Another use of the CCI confirmation signals is to show you that the trade you entered, without waiting for a CCI confirmation signal, is on the right path and doing well. Some people even add to their position at this point but you should not do that while you are learning Woodies CCI.

It is also important to know that while watching the chart you will see the CCI indicator move and flip around a little or a lot. It might move fast or slow. No one can tell what will happen next. You cannot know what pattern will print next. No one knows. No one has a clue. All you do is follow the chart, spot a pattern, enter the trade when you spot an entry signal and exit it when you see an exit signal. That is what you do. So it doesn’t matter what you think the pattern will do. You just react to what it does do. It may even flip back around and go back the opposite way again after you enter or exit a trade. We don’t care 

because we know we can’t predict what is going to happen. You shouldn’t care either. Woodies CCI gives you safe profits and protects you from large losses. Let it work for you. React. Don’t think.

Woodie has defined a set of pure CCI exit signals. There are no other CCI exits. Do not make up exits.

Woodie created the CCI exit signals for a reason. It is the most crucial part of the system. Why would you not follow them? If you want to be successful then you must exit when you get an exit signal.

Follow these exits precisely. No excuses. Period.

            CCI Exit Signals                                   Explanation

1. CCI hooking or going flat                      When the CCI 14 is hooking or in a horizontal direction.

2. CCI Trend Line Break (TLB)               When the CCI 14 crosses over a trend line.

3. Turbo CCI crossing into the CCI          When the TCCI 6 crosses over the CCI 14.

4. CCI cross of the zero-line (ZLC)          When the CCI 14 crosses over the CCI zero-line.

5. CCI hook from extremes (HFE)           When the CCI 14 hooks at or past the CCI +/-200 region.

6. CCI not moving / no progress               When the CCI stops progressing in the direction of our trade.

7. Profit about equal to hard-stop  Profit in ticks reaches about equal to that of hard-stop loss.

The exit signal defined as ‘Profit equal to hard-stop’ is not a true CCI signal of course. It’s defined in terms of ticks equal to around your hard-stop loss order setting. You set your hard-stop loss away from the market at a set number of ticks that will allow free movement of the CCI work its own signals. It stands to reason that if the trade progresses with positive gains to equal this amount in ticks before giving a CCI signal that we should partial out. Play it safe and partial out 1 contract and set remaining position to b/e+1 as stated before when you see a nice profit. This condition will not always present itself. The CCI will signal far sooner than this will happen so don’t focus on it.

The exit signal that is mentioned above as ‘not moving / no progress’ is one that will need some additional explanation. For this exit signal we would exit if the CCI trade is not moving much at all or does not keep going in our direction. We expect the trade to move after we get in. After all we did enter when momentum was in place so it’s reasonable to expect it to keep going. If it stalls or becomes stagnant, even though it’s still pointing in the same and correct direction, then we must exit. If the CCI bar presents this condition then it hasn’t turned around on us and so we are not losing much if anything at all so we can give it some time to watch it closely. If it does not move forward into profits in under a few minutes then it’s best to exit the entire trade. Woodie guarantees better trades down the road!

You will learn to recognize what these Woodie CCI exit signals look like as you read on through this document. However, for added clarity the CCI exit signals listed above can all happen anywhere in the 

CCI region on the chart except for the CCI cross of the zero-line exit signal, which has to occur at the CCI zero-line value, and the CCI hook from extremes exit signal, which has to occur at the +/-200 CCI value area or greater such as +/-250 or even +/-300, etc.

When one or more of these exit signals is seen it may mean that another one of Woodies CCI patterns is setting up. This new CCI pattern could be a signal for a trade entry that goes against your current position. This is why we exit our trade. For example a ZLR could turn into a shamu. If we don’t exit and go into “Hope Mode” then we are not following Woodies CCI guidelines and we will quickly lose our trading capital. Do not violate these guidelines.

If trading one contract then you will exit your trade in full as soon as you see one of these signals. You may give it a few seconds after the signal appears to see what the CCI bar is going to do but do not wait any longer then when there is 20 seconds left on the count down clock or a few ticks left on the tick counter before the bar prints.

Also, never wait for the CCI bar to print against you when you need to exit. Doing so would be way too long to wait around in the trade, which will cost you profits and give you larger losses. This exit rule is very strict because we want to lock in profits and the CCI is warning us that it may go against us so we must exit. Even if it doesn’t end up going against us we don’t care. We take the safe exit as shown by Woodies CCI and protect our trading capital. Another trade is few minutes away. We are in no hurry.

After entering a trade if it goes your way, maybe 7+ ticks for most futures, 4+ ticks on ZB, and 10+ on YM, but still has not given you a first exit signal then you need to change your hard stop-loss order to break-even plus 1 tick (b/e+1). Once a trade has gone nicely in your direction then do not let it turn into a loser. This is the guideline and you must follow it. Changing the hard stop-loss order is very easy using a good front-end tool. Usually just once click and it’s done. Ask the room what Woodie uses as a profit point in which to move stops to b/e+1 for a particular market.

If trading more than one contract then you should consider exiting your contracts in at least two separate points. You can even use two exit points and leave some in as a runner as well. Just as long as you use Woodies CCI exit signals to partial out along the way you will be fine. Be sure to set the remaining contracts to b/e+1 to protect profits. The first spot in which you partial out your trade when trading multiple contracts is defined above. The next set of exit signals will be defined below. They are of course similar in nature.

The only exception to this rule is if right after you enter you see that it immediately turns on you, you get a very bad feeling in your stomach and you say “OH NO!”  This type of exit is when the trade turns hard and fast against you in a very harsh manner or you entered completely by mistake. Do not stay in the trade to wait around and see what will happen. When this happens you must exit the entire position immediately. You cannot go wrong by exiting a trade right after you entered. Again, just exit the entire trade in full without questioning it or thinking about it. There will be better trades down the road. Woodie guarantees it!

If trading two or more contracts then you exit half or partial out at the first exit signal and set the stop-loss on the remainder of the contracts in your position to b/e+1.

Also, never change your stops after you set them as defined by these guidelines. Do not trail your stops. This leads to more thinking and focusing on prices and will cause errors. Do not think.  Do not change your stops. Never ever violate these guidelines. Even Woodie does not change his stops for this reason. You should not either.

To be very clear on this you would enter your hard-stops at the same time you took a trade. Then you would set your stops on the remaining position to b/e+1 after you get your first CCI exit signal and partial out unless you had a CCI pattern failure or “OH NO!” entry in which you would exit your trade in full of course.

The next set of exit points are described below. These are really no different then the ones defined above except that they give the trade a little more time. This is fine. This is how Woodies CCI helps to automatically take profits (1^st exit point explained above), protect our profits (setting our stops to b/e+1), and keeping losses small and letting winners run (allowing the trade to progress after setting stops). It’s all included so just follow it.

If you are trading 2+ contracts then after you partial at your first exit signal and set your stops to b/e+1 you would then partial out of some more contracts and/or exit in full each time you see one of the following signals. You keep doing this until you have exited your entire trade position:

1. The CCI bar is still going against your trade with 20 seconds left to print.

2. The CCI bar actually goes ahead and prints against you.

3. You get another one of the exit signals defined above.

4. The CCI bar takes out the current swing high/low against your position. This condition requires you to exit your entire trade and not partial any longer.

5. The b/e+1 stop-loss is hit. Here the entire trade is exited of course.

6. Price hits an amount of profit that you define as a home-run of maybe $300 to $500+ per contract in ticks.

7. A new CCI Pattern develops that would indicate a trade against your current position. However, if this happens then one of the above exit signals would have already occurred as well. I add it for completeness and understanding only.

Can you tell that we don’t wait around very long?

Is it very clear to you that we exit when the CCI turns back the other way against our entry?

Do you understand that the very first exit point is the same when you are trading 1 contract or if you are trading 2+ or more contracts?

Do you understand that all the exits are very well defined and require no thinking, guessing or hoping?

Is it clear that we want the trade to go our way as soon as we enter?

All this is done without watching price bars. We don’t need them. CCI monitors them for us perfectly and will tell us when the momentum is turning against us. Trade the guidelines exactly as defined.

With every single trade and for all of Woodies CCI patterns you will enter and exit the trades the same way every time. No changes. No thinking. No making up new exit signals. No waiting around to see what will happen. You exit, exit, exit. Period. Follow the guidelines and you will be fine.

You do not have a choice about when to exit. Woodies CCI defines all exits for you.

Woodie has spent a great deal of time, many years in fact, defining these exits to be optimal.

Just exit the trade and wait for the next pattern to come along.

Woodie does not use pure limit orders to enter or exit trades. He mostly uses market orders to enter and exit his trades. When the CCI gives you the signal to enter or exit a trade and you try to use a limit order you could either miss the order or still be left holding a position in a bad trade.

When using market orders you need to trade thick and liquid markets so that there is not much slip on your order fills. Woodie usually only trades during standard market hours so using market orders tends to be fine.

When using market orders pay special attention to currency futures markets such as EUR, JPY, GBP, etc or even some futures indexes such as HSI as they can be very jumpy regardless of the time of day. Be forewarned that this can cost you unexpected losses. Try to trade these types of markets during times of heavy trading or just stay away from trading them at all until you no longer need this document.

If limit orders are needed for entry then you can use a front-end that will allow you to enter at the best price possible and chase it a set amount of ticks if the market moves away from you. This will allow you to try to get the best price and will still allow some limited chasing if the market moves away from you. Some people may use around 2 ticks for this.

Regardless of how you enter your trade consider just using pure market orders to exit your contracts. You do not want to be left behind trying to get a better price while the market moves away from you. When you get the CCI signal to exit the trade you want out now. Do not try to get cute. Just exit. Period.