I look at 3 aspects of CCI: 1. Hook from extreme: trend too strong, so going to pause; 2. Regular divergence: trend too weak, so going to pause; 3. Direction of smoothed CCI: serves as a confirmation of the trend.
I have been using CCI for about a year and it works quite well. However when market is in a tight range going sideways the CCI can become very overreactive and will give you false signals. I use a 34 ema to confirm trend. also helps to look at longer term charts. jump up to 9 or 13 min to see where we are heading. I also take lots of counter trend trades in the chop which I don't advise doing unless you are used to this kind of bad behavior If the market is choppy I can still scalp the YM with a 33tick chart using CCI but I also use a channel on price. Just hang around in Woodies room for a few months and it will start to make sense to you. He is the CCI master. Good Trading all
I also use the CCI. I would definitely recommend using another indicator along with the CCI. I don't use woodie's cci setups. I don't mean to bash anyone, but from what I see no one in the room really follows the written CCI rules. I don't understand how people can have 7 - 10 trades on a 3min or 5min chart using those cci rules. I've also noticed woodie taking some trades against his rules. I don't blame him though, he's been trading with the CCI for so long that he understands its patterns and movements.
1. CCI is simply a de-trend price without any smoothing; 2. One consequence is that high frequence portion is not filtered out; 3. Second consequence is that one needs trend to determine the full picture, because market price = trend componenet+ de-trended componenet (which is CCI here).