Trading with the trend is one of the easiest ways to trade the forex market. When trading with the trend, momentum is on your side. The trade does not have to fight against the flow of the market. Instead, price is moving where momentum is going.
This leads us to the most glaring advantage of trading with the trend, which is trading high probability trades. Because traders are trading with the flow of the market, the chances that price would move in the direction of the trade is high. Price would generally move in the direction of the trade often. If paired with a good trade management skill, traders would have very high win ratios and experience losses less often.
But how do we get to trade high probability trend following trades? The key is in aligning the long-term and mid-term trend with a short-term momentum entry.
Holt Trend Forex Trading Strategy is a simple yet systematic trading strategy that helps traders align the long-term, mid-term and short-term trends. It provides traders accurate trade entries which should provide yields more often.
Holt Double Exponential Smoothing Trend
Table of Contents
The Holt Double Exponential Smoothing (DES) Trend indicator is a custom indicator which helps traders identify trend direction and strength.
Although the Holt DES Trend indicator is technically a momentum indicator, its underlying mathematical basis is intended for forecasting trend direction. Just like with most statistical forecasting methods, the Holt DES Trend assumes a linear trend trajectory coming from previous price movements. This makes the indicator more of a predictive type of indicator rather than a lagging indicator.
The Holt DES Trend indicator displays its reading and forecast of trend direction as histogram bars. Positive bars indicate a bullish trend direction, while negative bars indicate a bearish trend direction. Longer bars also indicate a stronger trend while shorter bars indicate a weaker trend.
The HMA indicator is based on the Hull Moving Average (HMA).
The most basic moving average line, which is the Simple Moving Average (SMA), is known as a lagging type of moving average. It is less responsive to price movements making it difficult for traders to react to price movements promptly. For this reason, other forms of moving averages were developed. The Exponential Moving Average (EMA) and the Weighted Moving Average (WMA) were developed to address the lagging characteristics of the moving average and provide a more responsive type of moving average line. The Hull Moving Average takes it a notch further by making the indicator extremely fast and responsive. Yet it still retains a smooth characteristic which allows it to avoid false signals on choppy markets more effectively.
The HMA indicator, although based on the Hull Moving Average (HMA) line, is not displayed as a moving average line. Instead, it is displayed as bars overlaid on the price candles. The bars change colors whenever the slope or trajectory of the HMA changes.
In this setup, blue bars indicate a bullish trend while orange bars indicate a bearish trend.
This trading strategy provides trade signals by aligning the long-term, mid-term and short-term trend. To do this, the strategy uses three indicators, a 50-period Simple Moving Average (SMA), the Holt DES Trend indicator and the HMA indicator.
Although the 50 SMA is generally considered as a mid-term trend moving average line, since this indicator responds slower to price changes compared to the other indicators, we will be using it as a long-term trend indicator. Trend direction will be based on the location of price in relation to the 50 SMA, as well as the slope of the 50 SMA.
The Holt DES Trend indicator would represent the mid-term trend. Trend direction on this indicator will be based on whether the histogram bars are positive or negative.
Finally, the short-term trend will be based on the HMA indicator. This indicator acts as the entry trigger. Trades are taken based on the changing of the color of the bars indicating a short-term trend reversal, aligning with the longer-term trends.
- 50 SMA
- Trend period: 18
- Forecast bars (horizon): 15
- Hull Trend
- HMA_Period: 20
Preferred Time Frames: 15-minute, 30-minute, 1-hour and 4-hour charts
Currency Pairs: major and minor pairs
Trading Session: Tokyo, London and New York sessions
Buy Trade Setup
- Price should be above the 50 SMA line.
- The 50 SMA line should be sloping up.
- The Holt DES Trend bars should be positive.
- Allow price to retrace causing the HMA bars to temporarily change to orange.
- Enter a buy order as soon as the HMA bars change back to blue.
- Set the stop loss on the fractal below the entry candle.
- Close the trade as soon as the HMA bars change to orange.
Sell Trade Setup
- Price should be below the 50 SMA line.
- The 50 SMA line should be sloping down.
- The Holt DES Trend bars should be negative.
- Allow price to retrace causing the HMA bars to temporarily change to blue.
- Enter a sell order as soon as the HMA bars change back to orange.
- Set the stop loss on the fractal above the entry candle.
- Close the trade as soon as the HMA bars change to blue.
This trading strategy is a classic trend following strategy which trades on alignments between the long-term, short-term and mid-term trends.
This strategy works well when used in conjunction with price action and price pattern trade setups. It confirms the resumption of the short-term trend, which is usually preceded by a candle stick pattern indicating the short-term trend reversal.
Some traders trade this strategy based on a fixed reward-risk ratio using a fixed stop loss and take profit target. Other traders use a fixed stop loss and a floating exit strategy such as the one used in this strategy. Theoretically, based on historical data, trading based on manual exits should be more profitable. However, many traders fail to profit using a manual exit strategy because of lack of discipline and a good trading intuition. If you are finding it difficult to trade on a manual exit strategy, you may opt to have a fixed take profit target. However, it is equally important to be setting an ideal take profit target, one which is not too high lowering the probability of it being hit, and not too low making it difficult to make profits and cover losses.
Forex Trading Strategies Installation Instructions
Holt Trend Forex Trading Strategy is a combination of Metatrader 4 (MT4) indicator(s) and template.
The essence of this forex strategy is to transform the accumulated history data and trading signals.
Holt Trend Forex Trading Strategy provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.
Based on this information, traders can assume further price movement and adjust this strategy accordingly.
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How to install Holt Trend Forex Trading Strategy?
- Download Holt Trend Forex Trading Strategy.zip
- *Copy mq4 and ex4 files to your Metatrader Directory / experts / indicators /
- Copy tpl file (Template) to your Metatrader Directory / templates /
- Start or restart your Metatrader Client
- Select Chart and Timeframe where you want to test your forex strategy
- Right click on your trading chart and hover on “Template”
- Move right to select Holt Trend Forex Trading Strategy
- You will see Holt Trend Forex Trading Strategy is available on your Chart
*Note: Not all forex strategies come with mq4/ex4 files. Some templates are already integrated with the MT4 Indicators from the MetaTrader Platform.
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