Table of Contents
Recently, I published the Hull Moving Average indicator. I will talk about strategy.
This strategy relies heavily on the Hull Moving Average (HMA) and focuses on trading stocks and ETFs on weekly charts, though the example starts with daily charts for clarity. The trader manages multiple strategies, but this one is designed for those with limited time, as it only requires a few minutes a week. Here’s the breakdown of the strategy:
1. Hull Moving Average Indicator
- Primary Indicator: The Hull Moving Average (HMA) is the sole indicator for this strategy. It visually changes colors depending on market direction:
- Green HMA: Market is bullish; you’re looking for buying opportunities.
- Red HMA: The Market is bearish; you’re looking for selling opportunities.
- A second Hull Moving Average (with a more extended period, like 200 HMA) is used as a filter to determine the broader market trend.
- Long Trades: Only considered when the longer HMA is green.
- Short Trades: Only considered when the longer HMA is red.
2. Market Context: Trend vs. Sideways
- The strategy only works reliably in trending markets. In sideways markets, the trader avoids making trades.
- A trending market is confirmed when price action breaks out of a consolidation range and follows the direction indicated by the HMA.
3. Entry Points:
- A pullback to the Hull Moving Average:
- The first entry signal occurs when a trend starts (e.g., when the HMA turns green in a bullish market). The trader waits for a pullback to the Hull Moving Average line and enters an extended position.
- Avoid entering trades at extreme points where the price is overextended. Instead, wait for a pullback for a more favorable entry point.
- Engulfing Candles:
- The second entry signal is the formation of an engulfing candle near or below the Hull Moving Average. Engulfing candles signal strong momentum, and if they appear in a trend, they offer opportunities to enter the trade.
4. Stop Loss Placement:
- For long trades, the stop loss is set at the previous swing low, providing a clear exit if the trade goes against you. This ensures proper risk management.
5. Position Building:
- The trader may add to positions during significant pullbacks or when new engulfing candles form in favor of the trend. This allows for more enormous profits as the trend progresses.
- If the Hull Moving Average turns red after a pullback, the trader may reduce or close their position but remain flexible, especially in long-term trending stocks like those in the S&P 500.
6. Exiting Trades:
- No fixed targets: Instead of having predefined profit targets, the trader remains in the trade until the Hull Moving Average turns red, signaling an exit.
- Alternatively, profits can be taken incrementally as the trend moves in favor, with more conservative profit-taking when the market shows signs of reversing.
7. Weekly Chart Focus:
- The strategy is primarily implemented on weekly charts, meaning the trader spends minimal time (around 15 minutes a week) managing these positions.
- On weekly charts, pullbacks and engulfing candle setups provide strong signals, allowing the trader to stay in trades for extended periods and avoid overtrading.
8. Examples:
- Stocks like Amazon and Google are referenced, demonstrating how pullbacks to the Hull Moving Average provide excellent long-term entry points.
- The strategy works well with long-term uptrends, especially in major indices like the S&P 500, where trends are more predictable and robust.
9. Key Notes on Execution:
- Patience is essential, as the strategy only triggers during trends, and trades are entered on pullbacks rather than at market extremes.
- The trader avoids staying in sideways markets and relies heavily on the color change of the Hull Moving Average to filter good and bad trades.
This strategy captures prominent, long-term trends using a simple indicator setup, minimizing time spent managing trades. The key is to wait for pullbacks in trends and use the Hull Moving Average as a guide for entries and exits.
Trader at Leanta Capital
Igor has been a trader since 2007. Currently, Igor works for several prop trading companies.
He is an expert in financial niche, long-term trading, and weekly technical levels.
The primary field of Igor's research is the application of machine learning in algorithmic trading.
Education: Computer Engineering and Ph.D. in machine learning.
Igor regularly publishes trading-related videos on the Fxigor Youtube channel.
To contact Igor write on:
igor@forex.in.rs
He is an expert in financial niche, long-term trading, and weekly technical levels.
The primary field of Igor's research is the application of machine learning in algorithmic trading.
Education: Computer Engineering and Ph.D. in machine learning.
Igor regularly publishes trading-related videos on the Fxigor Youtube channel.
To contact Igor write on:
igor@forex.in.rs
