HAMA Super Scalper Forex Trading Strategy

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HAMA Super Scalper Forex Trading Strategy

once heard from a fellow trader say, “A trend is a run, and a run is a trend. The difference lies only on the timeframe.” I’m not sure if this was originally his or he just quoted this. Still, this thought on trading holds a lot of truth in it.

Many traders use trends and momentum interchangeably. In a way, trends and momentum does have so many similarities. In fact, traders may argue that they are the same. However, my personal take is that trends tend to matter for the longer-term direction while momentum matters for the more immediate direction.

Trends could be considered a trend if price action is constantly making higher swing points in an uptrend or lower swing points in a downtrend. However, the same trending market condition on the shorter timeframe could be one long momentum candle on the higher timeframe. This is why trends and momentum are the same, and the only difference is in the timeframe.

One key technique that traders could use when trading trend following strategies is taking trades whenever the longer-term trend aligns with the short-term momentum. Trading in the direction of the trend gives us a chance to get direction right more often than not. At the same time, taking trades in the direction of the immediate momentum allows our positions to move in the direction we want as quickly as possible. The result is a high probability trading strategy.

In this strategy, we will be looking at aligning trend and momentum based on two technical indicators that excel in identifying trend direction and momentum reversals.

Heiken Ashi Moving Average

Heiken Ashi in Japanese literally means “average bars”. The Heiken Ashi Moving Average (HAMA), also known as the Heiken Ashi Smoothed indicator, is a trend following technical indicator which identifies trend direction by plotting average bars.

Heiken Ashi Candlesticks is a new method of charting price, in which the highs and lows of the candlesticks remain the same. However, the open and close of each candle are modified to plot bars that change color depending on the average direction of recent price movements.

The HAMA on the other hand differs from the Heiken Ashi Candlestick because it is not a price charting method. Instead, it resembles the Exponential Moving Average (EMA) more closely. It is like a moving average which plots bars instead of lines. These bars change color depending on the average direction of price. Blue bars indicate a bullish trend, while red bars indicate a bearish trend.

The HAMA bars move characteristically smoothly, making it very accurate. At the same time, it is also very responsive to price action movements making it an excellent trend following technical indicator.

Super Scalper

Super Scalper is a momentum technical indicator which is based on a modified moving average line.

In fact, the Super Scalper line resembles the Hull Moving Average (HMA) line. It is characteristically very smooth yet at the same time very responsive to price action movements. However, it has been modified to follow price action quite closely on the short-term. This makes the Super Scalper ideal for identifying short-term momentum reversals.

The Super Scalper line also changes color to indicate the direction of the trend. A blue line indicates a bullish momentum, while a yellow line indicates a bearish momentum.

The Super Scalper indicator was developed to fit the needs of scalp trading strategies. It is very responsive to short-term price action movements making it ideal for scalping. However, it could also be used for day trading.

Trading Strategy

HAMA Super Scalper Forex Trading Strategy is a trend following strategy which makes use of the Heiken Ashi Moving Average indicator and the Super Scalper indicator to find opportunities whenever the main trend direction and the shorter-term momentum are in confluence.

The HAMA bars are used to identify trend direction. The main trend direction is based on the color of the bars that the HAMA indicator plots.

Price action should also confirm the direction of the trend based on a consistently rising or falling swing point pattern.

The Super Scalper indicator is used to identify the specific entry candle based on the shifting of the momentum. This is identified by the changing of the color of the Super Scalper line. Trades are considered valid as soon as the direction of the HAMA bars and the Super Scalper line are in confluence.

Indicators:

  • Superscalper
  • HAMA_

Preferred Time Frames: 5-minute, 15-minute and 30-minute charts

Currency Pairs: FX majors, minors and crosses (low spread currency pairs only)

Trading Sessions: Tokyo, London and New York (high volatility sessions)

Buy Trade Setup

Entry

  • The Heiken Ashi Moving Average indicator should plot blue bars.
  • Price action should be plotting consistently rising swing highs and swing lows.
  • Price action should temporarily contract causing the Super Scalper line to temporarily change to yellow.
  • Enter a buy order as soon as the Super Scalper line changes to blue.

Stop Loss

  • Set the stop loss on a support below the entry candle.

Exit

  • Close the trade as soon as the Super Scalper line changes to yellow.

HAMA Super Scalper Forex Trading Strategy

HAMA Super Scalper Forex Trading Strategy 2

Sell Trade Setup

Entry

  • The Heiken Ashi Moving Average indicator should plot red bars.
  • Price action should be plotting consistently dropping swing highs and swing lows.
  • Price action should temporarily contract causing the Super Scalper line to temporarily change to blue.
  • Enter a sell order as soon as the Super Scalper line changes to yellow.

Stop Loss

  • Set the stop loss on a resistance above the entry candle.

Exit

  • Close the trade as soon as the Super Scalper line changes to blue.

HAMA Super Scalper Forex Trading Strategy 3

HAMA Super Scalper Forex Trading Strategy 4

Conclusion

This trading strategy is a decent trend following strategy which could work well for trend following traders. The key to trading this strategy successfully is in finding currency pairs that are clearly trending on the lower timeframe. However, it is also important to note whether there are key support or resistance levels on the higher timeframes where price may bounce off from.

Some traders may prefer setting fixed take profit targets, which is also a prudent way of trading this strategy. This may be based on key support or resistance levels, the length of the prior momentum move or a fixed ratio of the risk on the stop loss. Traders may modify it according to their preferences.

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