Ken Wood once created a strategy based on the commodity channel indicator (CCI) and LSMA, and it was distributed free of charge. The Woodies CCI system proved so popular that it is still in use today.
The author of the strategy advised 4 types of signals:
- Rebound of CCI from the zero level – it is desirable that an uptrend has already been established. There are certain tolerances – under the rebound is also considered the casting / shortfall of the line to the zero level. Tolerances depend on the volatility of the instrument on which the strategy is used, usually a range of ±30 or ±50 is enough.
- The Woodies CCI strategy actively uses constructions on the indicator lines, the Price Action pattern, a deviation with a reversal, suggests an intensification of the rebound from the zero level by the breakdown of the trend line. This pattern should form in an uptrend downtrend.
- The only difference from the previous pattern is that CCI does not need to bounce off the zero level. When building a trend line, the trend should not change, only in this case the pattern refers to work in the direction of the trend.
- The Woodies CCI strategy uses both horizontal support and resistance levels. The work is carried out in the direction of the breakdown, which coincides with the direction of the current trend. Lines are built on at least 2 peaks/bottoms located approximately at the same level.