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.
Free trading platform demo
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.
Results
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.
Practical implementation
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.