Trading Woodies CCI System by Jeff
email@example.com Copyright © 2004 Jeff Gannon
There are currently
8 patterns in Woodies CCI.
Woodie has defined
all of them. Do not follow any other methods, patterns or systems. They will add
another level of complexity and will only serve to confuse you while you are
learning this system.
Do not rename any of
the patterns. I’m sure it is very obvious why this shouldn’t be done but
some still try to do it. You could go ask the traders that tried this but they
are no longer trading. Just stick to the system as Woodie has defined it.
researching and testing new patterns all the time. He will let us know when he
finds another great new pattern.
Woodies CCI Patterns can be used on any time frames. It can even be used very successfully on daily charts and larger time frames as well. Note that Woodie uses a CCI 20 period on charts with daily time frames and larger. He does not use the TCCI at all on the daily or larger time frame charts.
You want to take CCI
patterns that are robust, full-bodied, and clear. Not ones that are constricted,
tightly wrapped around the zero-line, condensed or strange looking. There are
far too many trades to take during the day for you to force a bad trade. Re-read
this again and again. Follow it closely. This is one of the parts of Woodies CCI
system that keeps you from over trading. You do not need to think about
overtrading. Just follow the guidelines and it will be taken care of
The Woodie CCI
Patterns that we use to trade are as follows and are not necessarily listed in
order or winning percentages.
A zero-line reject
(ZLR) pattern is a CCI bounce off of or near the zero-line (ZL). It can bounce
off of or near the zero-line anywhere from +100 to –100 for both long and
short trades. Some people like to narrow the range down to +/- 50 which can
provide a better pullback. The entry would be the first bar that rejects or
flips up away from the zero-line.
psychology behind Woodies CCI ZLR pattern is that it shows traders when to buy
the dips and sell the pullbacks. No other indicator in the trading world can do
that except for the CCI.
You can combine the
ZLR pattern along with a trend line break (TLB) pattern to add strength to the
signal for a greater probability of success. If using the ZLR along with the TLB
then you would wait for the CCI to cross the TLB pattern to enter. You will
learn more about the trend line break (TLB) pattern later in this document.
The ZLR trade is a trend trade. New traders of Woodies CCI should be taking this type of trade. In fact this could be the only Woodies CCI pattern trade you take during your entire trading career and still create excellent profits for yourself
A shamu pattern is
when the CCI passes through the zero-line (ZL), flips back around and comes
through the ZL again, and then once again turns around and crosses through the
zero-line to continue its original direction. It’s sort of a zigzag pattern
around the ZL. It doesn’t have to be directly on the zero-line but it’s
better when it is. When the zigzags on the CCI happen within the +/-50 area it
makes for a better pattern.
Notice that the
shamu trade pattern is a failed zero-line reject pattern. Originally it was a
ZLR pattern. But the ZLR turned around and failed so we had to exit. This is why
you do not wait around and hope a trade is going to correct itself and go back
your way. If you were in all of these trades as the initial ZLR trade and it
turned on you but you did not exit then you would be racking up potentially
large losses. You must exit based on the guidelines Woodie has created. That is
the defined system. You have no choice.
The shamu trade is a counter-trend trade and was developed as a type of stop-and-reverse (SAR) trade to the failed ZLR. New students of Woodies CCI should not be taking this type of trade. However, keep your eye on it and learn as you progress
A Trend Line Break
pattern uses two or more decent sized bumps, using CCI or TCCI, to lay the trend
line across them. Then when the CCI crosses or breaks that trend line (tl) that
is the signal to enter the trade. One end of the trend line should be at CCI
value +/-100 region or greater for it to be valid. Also, the more bumps you lay
it across the more valid that trend line is. Using only two bumps is normal and
creates a perfectly valid TLB. You can also mix the use of CCI and TCCI bumps
for each trend line. This pattern is also used as one of the exit signals and as
a CCI confirmation signal too. It comes in quite handy and is widely used in
Woodies CCI system.
The TLB trade can be
both a trend and a counter-trend trade. New students of Woodies CCI should be
taking this type of trade if it is a TLB with the trend. Do not take this trade
against the trend. However, keep your eye on it and learn as you progress.
You can combine the
zero-line reject (ZLR) pattern and the reverse divergence (rev diver) pattern
along with a TLB pattern to add strength to the signal for a greater probability
of success. When combining these together you would still enter on the break of
the trend line, as it will occur last.
Another method of entry on a TLB trade is to use the CCI confirmation signal cross of the +/- 100 value. This provides a greater chance that the trade will be successful. You do not have to use this method and you may get more profit on the TLB trade if you get in well before this point. However, if you do not add the CCI confirmation of a +/- 100 cross then your TLB trade might not work out so often. Pick a method and stick with it. Don’t change daily.
You will very often
find the TLB and ZLR show up together. Sometimes the rev diver pattern will show
up with them as well. You should start to notice that CCI patterns all come one
after another and also form together to make stronger signals. Do not let this
confuse you. You only need one CCI pattern to take a trade. However if you
combine more than one signal it adds to the probability of success for that
The Vegas Trade
Pattern is a combination of several things. First it needs the hook from extreme
(HFE) CCI pattern and then a set of CCI bars shaped into a partial circular or
rounding pattern following that. These rounding bars must be at least 3 bars
minimum and can occur toward the zero-line or against it. In other words the
rounding can be in any direction regardless of what side of the zero-line (ZL)
the entire pattern is being formed on. However, the entire VT pattern must form
on the same side of the zero-line.
This means that the
swing high/low part of the pattern doesn’t have to be the rounding part of the
pattern. However, it is a stronger
signal when the swing high/low is the rounded part. Also, it can even have two
or more swing high/lows as well. The rounding is very important to the overall
pattern and indicates a struggle that may well lead to a strong trend reversal.
That last part of
the pattern is the trend line drawn straight across from the recent swing high
or low. A break of this swing high/low is our entry into the trade.
The entire Vegas
Trade pattern can have anywhere from around 8 to 12+ bars but when it gets too
far spread out past that before an entry signal is seen then the probability of
success is lowered and the strength of move could be less.
The Vegas Trade
pattern indicates a potential for a very strong change in the trend.
strongly recommends the use of the 25-lsma indicator as an additional criterion
for VT entry. When the 25-lsma indicator shows that price is on the side of the
direction of the VT entry then there is a greater likelihood that the trade will
be successful. LSMA stands for Least Squares Moving Average and can also be
found in some charting packages as Linear Regression Curve.
In other words, if
the VT is setting up for a long entry then you want price to be above the
25-lsma indicator and, if possible, you also want the 25-lsma to be pointing in
the upward direction as well. If a VT short is setting up then you want the
price to be below the 25-lsma and, if possible, you want the 25-lsma to be
pointing downward. Since we do not use prices to trade Woodies CCI system it is
recommended that you do not view prices just to see a 25-lsma indicator. Rather,
use a 25-lsma indicator placed in the CCI region that displays colors showing
these four conditions.
VT Trade is a counter-trend trade. New students of Woodies CCI should not
be taking this type of trade. However, keep your eye on it and learn as you
#5 - Woodies CCI Ghost Trade Pattern: Ghost article
The Ghost Trade
pattern has 3 bumps in it. It has an arm, a head and then another arm in its
pattern. The bumps used to spot this pattern can be made from the CCI or the
TCCI. However, most people use CCI bumps for this pattern.
It is preferable that the head is larger then the arms. To determine the
entry point for the Ghost trade you draw a trend line across the underside of
the Ghost across its neckline.
You can gauge the
expected CCI movement for the Ghost Trade by measuring the distance from the top
of the head to the neckline. The expected movement would then be a movement of
that same distance from the neckline in the opposite direction to that of the
head. You do not need to bother calculating the potential CCI move from the
neckline as you will be exiting the trade as soon as the CCI gives you an exit
signal anyways. All you need to do is follow the exit signals as defined in
Notice that when you
draw the neckline (trend line) on the Ghost pattern you combine a trend line
break (TLB) pattern along with the Ghost pattern which adds strength to the
signal for a greater probability of success. Sometimes the neckline will slant
toward the zero-line. These are the preferred Ghost patterns over the ones in
which the neckline slants away from the zero-line. However, both are fine to
Ghost Trade is a counter-trend trade. New students of Woodies CCI should not
be taking this type of trade. However, keep your eye on it and learn as you
Divergence (Rev Diver) pattern is very simple. Do not let if confuse you.
However, many people find it hard to understand and even harder to spot. This
shows us two things. One, the documents and explanations are too hard to
understand and just possibly confuse the matter. Two, and more interesting, is
that it may show us that by bringing in your prior ‘knowledge’ into Woodies
CCI system will give you headaches when trying to understand it.
This pattern was
named using words that remind you of things you have tried to learn before.
Maybe that is the reason why people find it so hard to spot. Forget the name and
do not let it conjure up your past knowledge. None of that will help you and is
absolutely not needed any longer. So forget everything you think you know about
it. Do not question the pattern or why it works at this stage. Just learn to
spot its ‘look’. It’s a very simple pattern I assure you.
You do not
need prices to trade the Rev Diver pattern. You do not need to verify
that it is a true reverse divergence pattern against price before you enter the
pattern. We do not use prices to trade Woodies CCI system. Woodie has done many
years of research and live trials on this pattern. He has determined that it
truly is reverse divergence when compared to price over 95% of the time. This is
why we as traders do not have to verify it against prices. We just react and
take the trade. Besides, lets say it turns out not to be a true rev diver
pattern when compared to price bars. The CCI will warn us anyways by showing us
one of the Woodies CCI exit signals.
divergence CCI pattern is a trend continuation pattern. We spot it by looking
for two inside bumps moving closer to the zero-line. By the word bumps we mean
the CCI movements up and down. Some call these peaks and valleys. We say inside
bumps to represent the bumps that are within the histogram or in other words
bumps that are closer to the zero-line. We never use outside bumps to spot Rev
The following two
rules are all you need to spot the Rev Diver pattern:
Divergence Trade is a trend trade. New students of Woodies CCI should be taking
this type of trade.
You can combine the Rev Diver trade with a zero-line reject (ZLR) trade or the trend line break (TLB) trade to add strength to the signal for a greater probability of success. You most always have a ZLR pattern along with a Rev Diver pattern. In fact you usually have two ZLR patterns that make up a Rev Diver since both inside bumps usually occur within the +/- 100 CCI area. The inside bumps actually represents the CCI ZLR pattern. Look at the charts closely and you will see both of them on each chart.
The hook from
extreme (HFE) trades are formed when the CCI prints a bar at or past the +/- 200
and then starts hooking back toward the zero-line. This trade is a very
difficult trade. The HFE pattern is used as one of the Woodies CCI exit signals
A HFE trade can
happen very fast. As soon as you see it hook back toward the zero-line you
enter. Make sure you have your hard stop-loss orders in as soon as you get
filled on entry, as this trade can get away from you very quick. As soon as you
see a signal to exit then you exit immediately.
You will get stopped
out of this trade often and this can happen even without seeing a CCI exit
signal. This trade has around a 50% chance of success if you take every single
HFE trade you see. However it can provide you with much larger profits than
losses. You must use hard stop-loss orders when trading Woodies CCI or any other
system for that matter.
hook from extreme trade is a counter-trend trade. New students of Woodies CCI
should not be taking this type of trade. However, keep your eye on it and
learn as you progress.
You can combine the
HFE trade with either a trend line break or a +/- 100 cross CCI confirmation
signal to add strength to the trade for a greater probability of success. Again,
when new you are not to take this trade. There are a great many experienced
traders that do not take this trade either.
The horizontal trend
line break (HTLB) trade is when a trend line is drawn horizontally across a
series of bumps that are lined up in a nice straight row. You can use a mix of
both CCI and TCCI bumps to draw the htl but most often you will see the CCI used
in these patterns.
You can draw the
trend line across these bumps regardless of whether they are inside or outside
bumps as well as on either side of the zero-line. Of course since it is a
horizontal trend line all the bumps will be on the same side of the zero-line.
It is best to have the break of the HTLB pattern within the +/- 50 area so that
there will be a greater possibility of success.
You would ideally
like to have 3+ bumps on which to draw the htl. However, you must have at least
2 bumps and this is fine. Each bump at the same horizontal level can show that
there is some type of support/resistance building up at that area. When broken
through it can lead to a strong movement and a great trade. You will usually see
a HTLB pattern in a choppy market. The HTLB trades can make for some of the very
best trades during that choppy market.
The HTLB trade can
be both a trend and a counter-trend trade. New students of Woodies CCI should be
taking this type of trade if it is a HTLB trade with the trend. Do not take this
trade against the trend. However, keep your eye on it and learn as you progress.