CCI (Commodity Channel Index) and EMA trading strategy

Strategy template description

The first step in this strategy is to identify the trend direction using the EMA indicator. A bullish trend is indicated when the faster EMA is above the slower EMA, while a bearish trend is indicated when the faster EMA is below the slower EMA.

Once the trend direction is identified, traders look for potential buying or selling opportunities using the CCI indicator. In a bullish trend, traders look for oversold conditions in the CCI indicator, which may indicate a potential buying opportunity. Conversely, in a bearish trend, traders look for overbought conditions in the CCI indicator, which may indicate a potential selling opportunity.

The strategy enters when CCI returns from an oversold area and faster EMA is above slower EMA. 

The strategy exits when the trend changes, meaning the faster EMA is below the slower EMA. It also exits on a Take Profit or Stop Loss. 

Step 1: Login and click on Create Strategy

Once logged in to the Vestinda app, click Create Strategy from the left menu.

Step 2: Use a strategy Template

Click on Use a Strategy Template from the overlay.

Step 3: Learn how the strategy works 

Once you reach the template page, you have the entire strategy code ready to be used. 

You can see the parameters for each indicator, but also modify the timeframe and all parameters. 

Step 4: Backtest strategy or Demo Trade

Before any execution, backtesting the strategy is the best place to start from. You can do it on thousands of assets and many years of historical data. 

This is helping you learn how to use these indicators, in what market conditions they work best, and what assets to trade using this strategy and indicators. Read more about Backtesting.

Demo Trading is another way to simulate the strategy without risking real money. This allows you to start using the strategy on the market moving forward on any available asset. Read more about Demo Trading.

Step 5: Results

This is the result of backtesting this template on BTCUSDT over a 2 year period from Feb 2021 to Feb 2023. 

With a simple strategy like this, we got an outcome that returned better than the benchmark. Profitability is not great, but adding more filters to the entries can help.

Once you're confident enough, you can start Real Trading.

Indicators in the strategy

Commodity Channel Index (CCI)

The Commodity Channel Index (CCI) is a technical analysis indicator that is used to identify overbought and oversold levels of an asset and potential trend reversals. It measures the difference between a security's current price, its moving average, and standard deviation. The CCI is typically calculated over a period of 20 to 30 time periods.

EMA (Exponential Moving Average)

Exponential Moving Average (EMA) is a type of moving average that places a higher weight on the more recent data points and is used to identify trends in an asset's price. Unlike a simple moving average, which gives equal weight to all data points in the calculation, an EMA gives more importance to the most recent prices, making it more responsive to recent price changes.

The EMA calculation involves smoothing out the fluctuations in the data by multiplying each data point by a weighting factor and adding the results together. The weighting factor is calculated based on the number of periods in the calculation and the time elapsed since each data point.

EMA is often used in conjunction with other technical indicators to confirm trends, generate signals for buying or selling, and identify potential reversals in an asset's price. It can be used on any type of financial instrument, including stocks, currencies, commodities, and indices.

In summary, the EMA is a type of moving average that gives more weight to recent data points, making it a useful tool for identifying trends and potential price reversals in financial markets.

Congrats! 🎉

This template is inspired by the following video: