Trading Woodies CCI System by Jeff
firstname.lastname@example.org Copyright © 2004 Jeff Gannon
The Trade Entry And Exit
To predict is for
slavesÖ To react is for kings! We
donít guess at what the market will do. We use Woodies CCI system guidelines
to take our trades.
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
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
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 donít need to
struggle to keep your losses small. Follow the guidelines and this is done
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 hasnít signaled a pure CCI exit yet and we are at a very nice profit so
donít worry. If the market will only give you a small profit then thatís
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 Ďhome runí 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.
Donít 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
itís 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
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. Itís 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 canít 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
There is no other
way to enter a trade. Quit trying to make stuff up. Itís already
There is no other
way to exit a trade. Quit trying to make stuff up. Itís already
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 ďThe Hope Mode.Ē 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
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 Ďvery aggressiveí, Ďaggressiveí, or Ďconservativeí. Pick
your method now and stick with it. It is suggested that you use the
Ďaggressiveí 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.
aggressiveí 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.
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.
Ďconservativeí 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 itís 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
wouldnít 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. Itís 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. Thatís all they are used
for. Ask what Woodie might use for hard stops-loss orders on a particular
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 itís 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 canít 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
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
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
thatís fine. That is why the hard stop-loss order is set. Move on and wait for
the next pattern to scroll by.
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
isnít, to help draw trend lines and as an early warning signal to exit a
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.
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.
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
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. Donít let
this confuse you. It can be used as both.
examples of a trade entry using CCI patterns and CCI confirmation signals are as
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)
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.
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 doesnít 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 donít care
we know we canít predict what is going to happen. You shouldnít care either.
Woodies CCI gives you safe profits and protects you from large losses. Let it
work for you. React. Donít think.
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
The exit signal
defined as ĎProfit equal to hard-stopí is not a true CCI signal of course.
Itís 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 donít focus on it.
The exit signal that
is mentioned above as Ďnot moving / no progressí 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 itís reasonable to expect it to keep going. If it stalls or becomes
stagnant, even though itís still pointing in the same and correct direction,
then we must exit. If the CCI bar presents this condition then it hasnít
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 itís 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
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 donít exit and go into ďHope ModeĒ 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
doesnít end up going against us we donít 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 itís 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 ďOH NO!Ē
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.
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 ďOH
NO!Ē 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 (1st 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). Itís 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:
Can you tell that we
donít 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
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 donít 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.