What Is Woodies CCI?
Ken Wood better known as “Woodie” is a trader of more than 30 years’ experience, and is well respected among traders of index futures such as the E-mini Russell 2000, E-mini Dow and the E-mini Nasdaq 100. His WCCI system is based on a number of patterns made by the Commodity Channel Index (CCI) indicator, originally developed by Donald Lambert. It’s a little different to most indicator-based systems, and traders tend to either swear by it or swear at it, but there is no doubt that its creator trades very successfully with it over the years.
The CCI itself is a momentum indicator. Such indicators all work in the same basic fashion – they plot the difference between a “fast” measure of price and a “slow” measure of the moving average. The MACD for example, measures the difference between a fast and slow moving average. In the case of the CCI, the “fast” measure is the price itself, and the “slow” measure is a moving average. Thus when we look at the CCI, what we are actually seeing is measurement of the deviation of price from its moving average.
The “divergence” between the price making a new high and the CCI failing to do so is a signal that momentum in the up move may be exhausting or the end of rising market. This is essentially how all momentum indicators work.
“Woodies CCI” system then, outlines a number of WCCI patterns made by the CCI. His chart setup is simply the basic 14-period CCI and without price bars involve. The Woodie patterns fall into two main categories, trend continuation and trend changing patterns:
1. Trend Continuation Patterns
1.1 ZERO LINE REJECT (ZLR)
1.2 TREND LINE BREAK (TLB)
1.3 TONY TRADE (TT)
1.4 GB100 (GB)
2. Trend Changing Patterns
2.1 FAMIR TRADE (F)
2.2 VEGAS TRADE (V)
2.3 GHOST TRADE (G)
Woodie now uses range bars developed by a Brazillian trader, Victente M. Nicolellis, to replace the time frame bars he used earlier. Each range bar has the same price increment/decrement and each bar closes either at the high or the low, regardless of where it opened.
Today, WCCI has now become a legendary. WoodiesBars (RenkoBar) is now being sold by Woodies. PRICE BARS on Price panel and CCI indicator and CCI Channel are used in the main trading chart exclusively in Woodies S&S Stocks Room.