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How I use the HMA indicator to set up Swing Trades Netting 100 pips a day!

 
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edbernard

How I use the HMA indicator to set up Swing Trades Netting 100 pips a day!

INTRODUCTION

Firstly, I apologize this is a long post. Howeer, it will be worth your time because you will learn an important strategy that could work for you. I tell you how I used to trade and why I changed my strategy. 

For the longest time I used to trade the London Open and focused exclusively on the GBP pairs plus the EUR-USD. I had reasonable success earning on average 30 pips a day. Then something changed.

REASON WHY I CHANGED MY STRATEGY

The GBP started showing extreme volatiity that stopped me out of these trades prematurely. Doggedly I kept at it because the traders I followed made videos showing how well they were doing. My successes were mixed, and more on the losing side. In the three years since I got funded after graduating from Gold 3, I managed to halve my account. 

I decided to stop and study what was going on. I backtested the strategy and was horrified to find that long term, following the rules exactly, resulted in more losers than winners. It was time to quit using this strategy and search for one that was more forgiving during high volatility. 

A UNIVERSAL RECURRING PATTERN WITH BIG PAYOUTS

This led me to intermediate and long term swing trading. I studied the chart patterns and noticed that they all without fail, went through three phases. 

Consolidation

Expansion

Trend movement. 

I also noticed those patterns produced gains in excess of 100 pips and even as high as 400 during the trend phase, before going into consolidation again. What did I need to do to catch these trends?

After reading a lot about swing trading, I learned that the least risky time frame to trade was the One Day chart. Since my objective was to go for gains greater than 100 pips, it meant I needed to set commensurate high stop loss levels. Usually at a 2:1 profit to loss ratio. 

LESSONS LEARNED FROM NO NONSENSE FOREX

Some of you may have heard of the Forex No Nosense YouTube Channel. There were three lessons VP taught that stuck. 

1) Trade the Day Chart only to minimise risk.

2) Learn how to avoid being taken out by the Big Banks by using judiciously placed Stop Loss Levels.

3) Use two indicators that will show the trend direction and where to enter and exit a trade 

SETTING STOP LOSS AND TAKE PROFIT LEVELS USING THE ATR INDICATOR

Use a 1.5 ATR, period 14 for the SL and 3 ATR for the take profit. Magically these aligned closely to support and resistance lines.  

MY MAGIC TWO TRADING INDICATORS

After much experientation I found that the HMA paired with the Stochastics was a winning combination for me.

All I had to do when scanning the charts was to look for pairs where the HMA changed color and if the STO was crossing over to the downside in the upper region for a bearish trade or to the upside in the lower regions for a bullish trade.

When I found pairs with these conditions met, I saved them. 

HOW I PICK THE PAIRS TO TRADE EACH DAY

I went through ALL the pairs to see which ones met my criteria and saved them.

Pairs that were on the European Time Zone were traded after the London Open. Pairs that had the US in them were traded after the US open. And pairs that had either AUD, NZD or JPY in them were traded after the Asian Open.

Since I am a night owl, livong in LA, I tended to trade the EU and Asian pairs more then the US. 

I was very selective. Those pairs that met my criterisa I looked to see where the price was heading before a possible reversal and I placed my buy or sell where I analyzed the trade was heading to. If it didn't take, and reversed before reaching that level, I would pick it up later. 

I suggest trading no more than 4 pairs at a time. 

ADVANTAGES OF LONG TERM TRADES

These loing term trades have several advantages. Since they develop over hours and days, one has more time to enter them.

Also, the large stop loss means that big spreads are not as crucial. This gives me the freedon to select any pair that meets my criteria.

It takes away the emotion when trades start to go negative. I have had trades that went as high as 150 pips against me and turned aroung to the prevailing trend and provided me with a profit of over 100 pips. 

DEMO TEST BEfORE USING FUNDED ACCOUNT

If you decided to try this strategy I strongly recommend using a demo account like I am currently doing. I will not be returning to my funded account until I have competed 100 trades and end up with an ending profit of at least 20%. Of course I am hoping for more. 

Remember there are no gurantees in trading. There will always be losses. Apiary Fund teaches us how to use risk management to minimie losses and maximise gains to make consistent profits over time. 

Tine to get to bed now after closing out four trades for a 118 pip profit. One was a looser and three were winners. I could have let them go on for more profit but I didn't want to be greedy.

I set a purple line to where I exited to see later on what happened to that trade. If I see a lot of them continuing in the direction I had planned on, I will consider not closing out premturely and let them ride to see how far they will go.

Since this is a demo account this is worth dong to see how far I can maximize my profits. After I revert to my funded account I shall update this post.

Happy trading. 

Edwin 

Wed, 05/20/2020 - 9:01am
 
Holliday Trading

Thank You! I follow VP also! What is your HMA set to?

 
Rookie

Ed thanks for the share, it share would be great to see the stats for the last 500 or1000 trades.

 
martygutierrez

I might give it a try.

 
martygutierrez

I followed VP for a long time and watched all of his videos. I tested and back tested so many different indicators and picked my entry and exit indicators and traded on a practice account. Trading the way VP showed me netted almost nothing but losers for me. I had only one winner of 250 pips and about 20 to 30 losers with -40 to -50 pips each. The guy probably makes money but I can.t figure out his system.

 
itecumsah

Thanks edbernard. What HMA's are you using?

 
allan

Thanks Ed. I intend to try this on the 15 min.

 
gene.v

Thanks Edwin,
I would like to reserch it and may be will try.

 
martina.imnetwork

lots on insight here i will def check out the you tube

 
FrankS

Does anyone know which algo tweak defines each of the 3 methods used in Alveo to adjust the HMA besides Period? The default is set to Method = 3. However, I discovered that can be adjusted to 1 or 2. So, the question is: what is the method adjusting to make the line different? As far as I can tell, it certainly does not adjust from a close to Price-high, Price-low or Price-typical; wish it did, though.

 
jude

Interesting... I am going to have to give this a look in my simulated acct.

 
ras5898

I would like to move more toward swing trading over a day or two. My other work requirements don't allow me to camp out and to play the wobble. So, thanks for this information.

 
russhargrave12

Ihave that same problem, Rex, kevin,and Steve Perry, all have great systems for longer term trading. the signals program on the web sight is also great for overnight.

 
depdawg43

Will try this as I don't have the time or inclination to sit in front of the charts for long periods of time.

 
greenstateproperties

found that very interesting, Can't wait to dig into it and give it a try

 
jaredemerick

I look forward to digging in deeper and giving it a try.

 
triguylm1

@ martygutierrez Marty, I believe you have a good point. It takes patience to wait for the HMA and Stochastics to provide the entry. So trading off the D1 chart can take a week or two to catch the highest probability trade. The frequency swing trade off the D1 chart can be up to 6 months. Trying to make this a daily swing trade system will be difficult because price will be somewhere in-between. So, catching price in-between the D1 High price levels and the Low price levels which are way over 600 pips, from pivot high to pivot low.

I think one can adapt this method along with higher frequency trading using consolidation vs expansion price cycles.

So, many other factors than relying on indicators to trade high probability, such as Price Patterns, S/R, Market Sentiment, Labor Data, etc.

 
robunited

Lindsey "The frequency swing trade off the D1 chart can be up to 6 months."

That's what I mean when talking to Mike, it can take up to years if you have to calculate your 'probability' of a setup based on D1 and 200+ trades (100 winners vs 100 losers), when you make the beeline as a rule in your Trading Plan.

Could you talk a bit about it, I'm interested to get your feedback to it? ;-)

 
mmwriter

A nice breakdown there.
I agree about trying to focus more on swing trading and seeing what you can do there.

 
triguylm1

Rob, you asked about some feedback on Swing trade using the D1 Chart.

So, I believe one has to add higher frequency trading along with a few long term swing positions; because, price will move "too far too fast" once in a while as the long term positions hold the intrinsic value. Eventually the value of the trade increase until very profitable and exit with large 600 pips or higher in some cases.

I agree with scalpers, the efficiency of gaining 2 to 3 pips with very high frequency can create higher daily yields, then the long term position. Keep in mind each long term position may only average 15 to 20 pips a day. Some days are positive 200 pips and some days are negative numbers, but average out over time, as long as price is trending and not holding a price range pattern,

Consider price range patterns ranging on the H4 chart can average over 350 pips from pivot high to pivot low. So, then these price range swings are 3 to 4 times a month if price holds within the H4 price range.

Looking at the D1 Chart, these H4 price range patterns look more like Elliot Wave Consolidation (350 pips for wave A). While D1 trends may last 3 months, with in that trend one can see several H4 price range patterns.

So the question, How can one determine when to enter a long term position and not get stopped in the short term if the trend hasn't completed it's run?

Many traders try to pick the very best price at the edges; but, think about the reason price pushed out to the edge in the first place. Then look at other reasons adding more pressure to continue to test these extreme prices.

It may take at least 2 years for an extreme low to pull out of the rut. . .Like how crude oil had hit an extreme low in March and April, and has not had a lot of bullish momentum coming off the bottom. Likewise, interest rates are not likely to increase for several more years as Federal Reserve continues to talk about low rates until inflation begins to increase. So far, the rate of inflation is very low as unemployment has added bearish pressure.

Most of the price action is speculation. So, we see price move both ways, which is very undecisive.

Also, We haven't seen very large price gaps over the weekends lately.

When a massive trend gets going in the future, price volatility will hit stop loss orders with the greatest of ease.

Even if one gets on the right side of the market, price will have a pulse wave, and take out the majority.

In my opinion a Risk limit of 5% is not going to help hold any long term attempt.

Consider one sets aside 5 trades of .02 lots each risking 3% if price moves 300 pips against the positions. Is that worth the risk if the goal is 600 pips making 6% over several months, which is only 0.14% per day average. (43 days x 0.14 = 6.02). Reference $10K account.

Note: 1K account would only give 30 pips to reach 3%.

Alveo allows one to trade 2.0 lots on a $10K account. so using 0.10 lots on the long term still leaves 1.9 lots left to trade with scaling in more positions along the way. Much like Shawn does when market sentiment is showing> trading one direction as momentum continues the main trend toward the long term profit target. The wobble system is a small part of going with the main trend in many cases, just as long as price continues to push in the trend direction vs counter trend.

Summary:
Price looks to continue to hold the H4 price range pattern.. . Until, something changes, such as a vaccine for Covid-19 and lower unemployment percentage, as inflation increases.

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