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Alison Heyerdahl
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Alison Heyerdahl
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Alison Heyerdahl
Head of Content
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Author
Author
Chris Cammack
Partner Manager and Financial Writer

<p>Chris manages the relationships with our partners to provide our users with the best Forex trading experience possible. Chris has 15+ years of experience in research, editorial and design for political and financial publications. His background has given him a deep understanding of international financial markets and the geopolitics that affect them.</p>

Learn more about Chris Cammack

Commodity Channel Breakouts

Reading time: 2 min | Intermediate | Technical Analysis

The Commodity Channel Index (CCI) was first developed for trading commodities but can be used for trading currencies as the market is a highly liquid one.  The CCI was created by Donald Lambert in 1980 to identify cycles on the commodity market, as they believed that the highs and lows of every cycle could be predicted in advance. Commodity Channel Index is used as a momentum oscillator on the Forex market, to identify overbought and oversold conditions, bullish and bearish divergences, detect momentum shifts earlier and to anticipate trend reversal.

CCI-Indicator

Figure 1: The CCI Indicator

Commodity Channel Breakouts Strategy

The Forex market exhibits a lot of false breakouts, which makes it difficult for beginner traders to successfully trade these patterns.  It is common to see a situation where there has been a breakout, the trader buys in, the market then reverses back into the previous range, and the trade closes at a loss. The CCI indicator is extremely sensitive to the constant changes in price, and it’s a good measure of momentum.  If the CCI indicator shows a reading above +100 it indicates that momentum is to the upside, and when the CCI indicator shows a reading below -100 the momentum is to the downside. To successfully trade the Commodity Channel Breakout strategy use these steps:

Buy Setup Rules

  1. Only use the Daily or the 1H chart using the CCI standard input of 20.
  2. Look at the chart and find the last time the CCI broke above +100, before dropping down back below the +100 and record that measurement.
  3. Buy when the market has a new CCI reading above +100 and breaks above the previously recorded reading from step 2.
  4. Put your stop loss below the breakout candle.
  5. Take partial profit once the market moves the same amount as your risk threshold, and move your stop loss to your breakeven.
  6. Take profit on the second half of the trade once the market moves to two times your risk threshold.

Sell Setup Rules

  1. Only use the Daily or the 1H chart using the CCI standard input of 20.
  2. Look at the chart and find the last time CCI broke below -100 before breaking above the -100 and record that measurement.
  3. Sell at the market once a new CCI reading goes below -100 and breaks below the previously recorded reading from step 2.
  4. Put your stop loss above the breakout candle;
  5. Take partial profit once the market moves the same amount as your risk threshold, and move your stop loss to your breakeven.
  6. Take profit on the second half once the market moves to two times your risk threshold.

Trading Examples

Let's look at two examples of trading with commodity channel breakouts, one in a short trade example and one in a long trade. 

Short Trade Example

Figure 2 is an example of a short signal.  After a new low in momentum represented by the CCI indicator, the prevailing bearish trend continued to extend to the downside and the total potential profit from this trade was only 35 pips after we were stopped at breakeven in the second half of our trade. But the trend clearly remained bearish after the stops were triggered.

Figure 2: EUR/USD 1H Chart

Figure 2: EUR/USD 1H Chart

Long Trade Example

A long trade example is shown in Figure 3.  In this case, the market reached both targets. A new high in CCI momentum was the trigger for an explosive move in GBP/USD which demonstrates the very high level of accuracy of using the Commodity Channel Breakout strategy in timing trades on the FX market.

Figure 3: GBP/USD 1H Chart

Figure 3: GBP/USD 1H Chart

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Meet the Experts Behind Our Unbiased Reviews

Chris Cammack

Partner Manager and Financial Writer

Chris Cammack

Chris Cammack is partner manager and senior financial writer at FxScouts, specialising in broker relations and forex market analysis. As the former Head of Content (2019–2024), he set editorial standards for all content published at FxScouts, including broker reviews, broker comparison pages and education.


With over a decade of experience in editorial management and partner relations, Chris builds and maintains our relationships with our partners to provide the best Forex trading experience for our users.


He also co-hosts the “Let’s Talk Forex” podcast with Alison Heyerdahl, where he explores trading strategies, industry news, and macroeconomic trends to help traders navigate the markets with confidence.

Alison Heyerdahl

Head of Content

Alison Heyerdahl

Alison joined the team as a writer in 2021. She is the Head of Content for FxScouts. She has a medical degree with a focus on physiotherapy and a bachelor's in psychology. However, her interest in Forex trading and her love for writing led her to switch careers. She has a passion for Forex trading and over a decade of editorial experience researching Forex and the financial services industry, producing high-quality content. She hosts a weekly podcast, "Let's Talk Forex", alongside Chris and has produced over 100 Forex educational videos for the FxScouts YouTube channel. She also writes weekly technical analyses and has tested and reviewed over 120 Forex brokers.

Ida Hermansen

Financial Writer

Ida Hermansen

Ida is a financial writer with a degree in Digital Marketing and a strong background in content writing and SEO. Her expertise extends beyond marketing and writing, with a keen interest in cryptocurrencies and blockchain networks. Ida's passion for crypto trading sparked a deeper fascination with Forex technical analysis and price movement. She is continually expanding her knowledge in Forex trading, staying informed about the latest trends and identifying the best trading environments for new traders.

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Financial Writer

Stefan de Clerk
The newest member of our team, Stefan has a degree in Marketing and more than a decade of experience writing quality content in both finance and tech. Stefan's deep fascination with how factors like geopolitical events, big data and market sentiment influence the financial markets drives his passion for Forex trading. He believes that if you want to feel the pulse of the world economy, trade Forex, and if you want to trade Forex, you need well-researched, unbiased and objective information.