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The HLHB Forex Trend-Catcher strategy
The HLHB Forex Trend-Catcher strategy was posted on the Babypips Forex website. It is a very complicated name for a very simple strategy. But do not write this strategy off just because it is simple. The back-test results are actually impressive.
|Suitable for||: All forex pairs|
|Instruments||: Futures and CFD-Forex|
|Trading type||: Daytrading|
|Trading tempo||: 3-4 signals per week|
|Using NanoTrader Full||: Manual or (semi-)automatic|
The strategy in detail
The Trend-Catcher catches short-term forex trends. The strategy can be used to trade all forex pair. The author prefers to use the 1-hour time frame. His focus is on the EUR-USD and the GBP-USD.
Three components are needed to generate a trading signal:
- An Exponential Moving Average over 5-periods
- An Exponential Moving Average over 10-periods
- The RSI over 10-periods, applied to the “median price” (High+Low/2)
When to open a position?
A buy signal is generated when the 5-period EMA crosses above the 10-period EMA while at the same time the Median RSI crosses above the 50 level. A short sell signal is generated when the 5-period EMA crosses below the 10-period EMA while at the same time the Median RSI crosses below the 50 level.
This example shows a short sell signal. The 5-period EMA (blue line) crossed below the 10-period EMA (pink line) while the Median RSI crossed below 50 at the same time. The signal is indicated by the red chart background.
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When to close a position?
The Trend-Catcher uses a 200-pips profit target and a 50-pip trailing stop. In addition, a new signal, in the oppositive direction, will close and reverse the current position. Open positions are always closed before the end of the week.
This example shows a buy signal. The 5-period EMA (blue line) crossed above the 10-period EMA while the Median RSI crossed above 50 at the same time. The position was kept over three days and eventually closed by the Trailing Stop with a nice profit.
The HLHB Trend-Catcher strategy is a simple strategy, which uses two of the most traditional technical analysis indicators: the Exponential Moving Average and the Relative Strength Index.
The strengths of the strategy are its simplicity and the quite robust back-testing results for the most popular forex instruments over the last years.
This example shows the back-test on the Euro-FX Future over the last 5-years.
Using the NanoTrader Full follow these steps:
- Open a forex chart.
- Select the template study "WHS HLHB Trend-Catcher” in the "WHS Strategies" folder.
- To trade semi-automatically, activate TradeGuard+AutoOrder in the chart. To trade automatically, activate AutoOrder in the chart.