Can this trading strategy get an extremely high win rate, especially in an extremely good market?
Can it beat some of the highest win rate trading strategies we have tested 100 times on the Trading Rush channel?
Well, the strategy I am talking about is the CCI indicator trading strategy.
CCI probably stands for Constantly Confused Investor.
Wait, that’s you.
Well, I have tested this indicator before in a mostly good market.
And it only got around a 36% win rate with a 1.5-to-1 reward-risk ratio.
But how high can the win rate go?
If I take 100 trades with it in an extremely good market, what will happen?
I mean, we have seen some strategies get a really high win rate in an extremely good market.
So, can the CCI indicator do the same?
On top of that, if I take another 100 trades in an extremely bad market, how low can the win rate go?
Well, let’s find out.
It’s a really simple indicator.
There is a line that moves up and down.
And then there are two horizontal lines.
The logic of this indicator is something like this.
When the CCI indicator value is below this bottom horizontal line, the price is considered to be oversold.
And when the CCI value is above the top horizontal line, the price is considered to be overbought.
In an uptrend, the oversold value can be a good sign because it can mean that there was a pullback or a discount in that uptrend.
When that happens, it’s a good time to buy.
But, obviously, we don’t know when the pullback is going to end.
So, when the CCI indicator turns around and goes above the bottom horizontal line again, many people see it as a good time to buy in the uptrend.
Something like this.
The stop loss goes below the swing low in an uptrend.
I also used the 200-period moving average to find the long-term trend and only took long trades when the price was above this moving average.
But this setup is only for the entry timeframe.
To take 100 trades in the extremely good and 100 trades in the extremely bad market, I went to the Gold/USD one-day timeframe and added a 9-period exponential moving average.
Since the Gold/USD has been in an excellent uptrend for a while, I only took long trades on it.
In the extremely good market test, I only took trades where the price was also above the one-day timeframe 9 EMA.
Furthermore, I drew red boxes where the price was not clearly above the EMA, or was ranging, slow, or choppy.
Basically, I filtered all the garbage market out and took trades in the extremely good market.
Then, in the other 100-trade test, I only took trades inside the red boxes where the price was absolutely garbage for a trend-trading strategy.
Remember that I filtered the good and bad markets on the one-day timeframe and took trades with the CCI indicator on the 30-minute entry timeframe.
I set the profit target at 1.5 times the stop-loss distance in both the extremely good and extremely bad market tests.
So, when I took 100 trades in the extremely good market, here’s what happened.
Many of the trades the CCI indicator gave were near the end of the pullback.
This indicator was really quick to react to the price movement, and was giving entry points really quickly when the price was changing direction.
Many times, the stop-loss distance was small.
In an extremely good market, that was not really a bad thing.
Since the price has a higher probability of moving in the trend direction, this small stop-loss meant that the profit target was also closer or was easily achievable.
And after 100 trades in the extremely good market, the CCI indicator gave around a 56% win rate.
Since the reward-risk ratio was 1.5-to-1, the break-even win rate is 40%.
So, this 56% win rate is a really good win rate.
The profit graph definitely goes up in the long run.
However, compared to some of the other strategies we have tested so far in an extremely good market, the CCI trading strategy completely sucks.
I mean, even in a mostly good market, the MACD trading strategy got around a 60% win rate.
So, even though the market was extremely good this time, the CCI indicator’s win rate is relatively low compared to the win rates of other strategies we have seen in an extremely good market.
But then again, in the previous “mostly good” market test, the CCI indicator only had around a 36% win rate.
So, the 56% win rate is at least better than that.
But how low can the win rate get?
Well, in the extremely bad market where the price was ranging, slow, and choppy, the CCI indicator’s profit graph slowly started to move in a downward direction.
It lost six trades in a row and only won three trades in a row.
Do you remember how I said the CCI indicator was giving entry points quickly when the price was reversing?
Well, that quick-reaction feature of this indicator came back to bite in the bad or slow market.
Basically, when the trend became even a little bit slow or choppy, the CCI indicator started to give more false entry signals.
This indicator sucks when there is more market noise.
So, after giving horrible trades in the bad market, the CCI indicator got around a 36% win rate.
But the funny thing is, this 36% win rate is still better than the MACD’s 32% win rate in the bad market.
MACD even lost 14 trades in a row.
The CCI indicator’s six losses in a row look much better than that.
Now, it’s time to give it a Trading Rush score, or TR score.
In the previous “mostly good” market test, the CCI indicator had around a 36% win rate and got an 18 TR score.
And in the “extremely bad” market test, since the CCI indicator got the same win rate, I’m going to give it the same TR score of 18.
But in the “extremely good” market test, even though it didn’t do better than the other strategies we have tested so far, it did better than before.
So, I’m going to give it a 7 out of 10 in the win-rate category because the 56% win rate is still better than the break-even.
For ease of use, I’m going to give it a 7.5 out of 10, same as before.
For reliability, I’m going to give it a 6 out of 10.
This is basically because it can easily give false entry signals when there is higher market noise.
As for consistency, it had a pretty consistent profit graph, but it was not the best we have seen.
So, I’m going to give it a 6.8 out of 10.
It was not better than the Bollinger Bands or MACD’s profit graph.
As for quality of trades, I like how it gives entry points near the end of a pullback in a trend.
But it can easily give false entry points, like whenever the price moves even a little bit in the trend’s direction.
So, I’m going to give it an 8 out of 10 in the quality-of-trades category.
And that brings the TR score to 35.3, which is, so far, below all the other strategies we have tested in the Extremely Good Market.
In the “extremely bad” market test, MACD, so far, has the lowest TR score.
This is kind of interesting because, in other market conditions, MACD has one of the highest TR scores.
Since this is an ongoing series, let’s see what other strategies can beat the MACD in the extremely good and extremely bad markets.
Thanks for watching.