The Cluster Indicator CC and CCFp updated Indicator For MT4
Table Of Contents:
- The Cluster Indicator CC and CCFp updated Indicator For MT4
- Currency strength and weakness
- Settings of the Cluster Indicator CC and CCFp updated Indicator For MT4
- How to trade with the Cluster Indicator CC and CCFp updated Indicator For MT4
The Cluster Indicator CC and CCFp updated Indicator For MT4 is a great indicator that is supposed to be used as a kind of strength meter of the different currencies. The indicator looks for weakness and strength in the currencies and then plots them in form of a line chart. The stronger a currencies is the higher its corresponding line chart will be and opposite if a currency is weak its line chart will be lower than the zero line.
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Once you found what you were looking for in the CCFp window, you can now use the CC window to find an entry. The combination of these two indicators is great and will almost always keep you on the right side of the market, because you are following the strengths and weaknesses of the two involved currencies.
In this article you will learn more about the weakness and strength of currencies and how this effects the market direction. You will also learn which currency has to be strong to move a pair to the upside and vice versa. Afterwards I will quickly explain the different settings of the Cluster Indicator CC and CCFp updated Indicator For MT4. At the end of this article there will a strategy that is based on this indicator and some examples shown.
Currency strength and weakness
The forex market offers a lot of different opportunities for you to trade. You will notice, that all the instruments consist of two currencies, meaning that you can trade the development of their relationship. Each of these two currencies has influence on the movement of the pair, which means that one currency getting stronger can have a huge impact on all the pairs it is involved in.
Let’s for example take the GBPJPY pair. This pair displays the relationship between the GBP and the Japanese Yen and thus changes if the strength of either of these changes. If the GBP get stronger, this pair will move up and if the GBP gets weaker, the pair will move down. However, the strength of the JPY can also change at the same time. A stronger JPY will move the pair to the downside, while a weaker JPY will move it to the upside.
As you can see it is quite important to know about the current strength and weakness of both the currencies of the pair you want to trade. Because both currencies have an influence on the movement, large moves can happen if both are in accordance with each other. As stated above, a strong GBP moves the GBPJPY to the upside AND a weak JPY will also result in an upward movement. Now if both these are true at the same time, meaning the JPY is weak and the GBP is strong, the GBPJPY will very likely make a strong move to the upside.
Spotting these kinds of accordance’s is exactly what the Cluster Indicator CC and CCFp updated Indicator For MT4 was developed for. You can very easily spot them by looking at the line charts and then picking a pair based on your observation. If you now find a good entry into this pair with the direction of the move that is very likely going to happen, you will have very little losing trades.
In the above image I have marked an example of this. I set up the Cluster Indicator CC and CCFp updated Indicator For MT4 to only show the lines of the currencies of the current chart to make it less confusing for you to see.
Settings of the Cluster Indicator CC and CCFp updated Indicator For MT4
As it is typically done in Cluster trading, the Cluster Indicator CC and CCFp updated Indicator For MT4 combines two indicators. Both have a different purpose and are very powerful when used together. We first use the CCFp indicator to get an overview of the current weak and strong currencies. As you learned above, we are looking for the pairs, where, based on their strength, will move the pair in the same direction.
Once we found such a pair, we can now open its chart and start using the CC indicator. This indicator is used to find good entries into the move that will likely happen in the near future.
Both the CCFp and the CC indicator have very similar settings, so I will only explain the settings of the CCFp indicator. You can see the settings window below.
These settings are all very simple and really don’t require you to change anything. With the first setting you can tell the indicator to only show you the lines of the currencies involved in the chart you are looking at. This can be useful to if once you found a good pair and want to reduce the complexity and reduce confusion while looking at the indicator.
The next four settings are used to change the underlying Moving Average, that is used to calculate the strength of the currencies. You can experiment a little with these values, but for me the default settings scored the best results.
Next you can choose which currencies should be included in the indicator and thus how many lines should be shown on the chart. You can also change the color of each currency and truly customize the indicators to best fit your chart and your liking. Lastly you can also customize the thickness of the lines.
How to trade with the Cluster Indicator CC and CCFp updated Indicator For MT4
As I said above, we first use the CCFp indicator and look for a pair where both currencies are at different positions in the line chart, meaning one at the top and the other one at the bottom. Doing so, I found the GBPJPY pair. The Pound is very strong while the Yen is showing a lot of weakness. I again set up the CCFp indicator to only show JPY and GBP to make it easier to see.
On the GBPJPY chart we can now focus on what the CC indicator is showing us. We want to use this indicator to find a good long entry into this pair. The idea is to first wait for the line of the strong currency to cross the line of the weak currency to the downside (vice versa for short trades), which signals a retracement. After this we just wait for the lines to cross to the upside again and enter in our direction. This typically signals the end of a retracement and thus the continuation of the upward move.
As you probably understand by now, knowing the strength of each currency is very important and can have a huge impact on your trading results. If you use the strategy above, you combine multiple edges and increase your results even more.
