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:

  1. An Exponential Moving Average over 5-periods
  2. An Exponential Moving Average over 10-periods
  3. 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.

The Babypips HLHB Forex Trend-Catcher strategy.

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.

Trading signal HLHB Forex Trend-Catcher Babypips.

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.

Babypips forex trading strategies back-test. Results Trend-Catcher.

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.