HLHB trading strategy

HLHB is an intraday trading strategy on high timeframes. Only indicators of standard indicators are used in the work - moving averages and stochastics. You can say that the rules of the strategy have long been known, but the results look good.

Trading strategy settings

Open the 4-hour chart of the currency pair EUR/USD and set the following indicators:

- EMA(10) at closing prices,
- EMA(20) at closing prices,
- A slow stochastic with parameters 14, 3, 3.

Signals to enter a position

The idea behind the trading strategy is that we open two long positionsWhen the EMA(10) (blue) crosses the EMA(20) (red) from bottom to top, with stochastics between 50 and 80.

To avoid false movements and get confirmation, we place orders 30 pips above the maximum of the candle where the crossing occurred. The distance of 30 pips was chosen because it is approximately 25% of the average true range of the pair.

A few clarifications:

After the EMA(10) has crossed the EMA(20), we check if the stochastic is in the extreme zone.

If the stochastic is not in the overbought or oversold zone, we place an order 30 pips above or below the candle where the crossing occurred.

Close the order if it is not triggered on the next candle.

Figure 1. Example of a long trade. The EMA(10) has crossed upwards over the EMA(20). Stochastic is above 50. The conditions for entry are met.

To open a short position, we apply the opposite rules. That means I open two short positions 30 pips below the candle following the one where the EMA(10) (blue) crossed down the EMA(20) (red), with the stochastics between 20 and 50.

Figure 2. Example of a short entry. The 10 EMA has crossed below the 20 EMA, the stochastic is below 50.

Exit from trading positions

Profit goals are set very simply. The first profit goal is equal to The average true range of the ATR pairwhich is approximately 150 pips. After this target is reached, we set trailing stop in increments of 150 pips for the second position, so we hold the position as long as it is profitable, without risk.

Of course, the price does not always reach the target, as any trend can turn against us. In this regard, we can manually close a position if the EMA crosses in the opposite direction.

For stop loss is used the candle, which was formed BEFORE the candle in which the interruption occurred. Stop-loss is set at 10 pips above the high or 10 pips below the low of this candle. If the price reaches the stop-loss level, then most likely the set-up has failed. A stop loss may not exceed 150 pips. The illustrations below show examples of stop loss placement.

Figure 3: Closing a long trade.

Figure 4: Closing a short trade.