High probability strategies that yield high returns seem to be what many traders are looking for. It seems to be the best of both worlds. Of course, you would want to have trades that seem to be a 100% sure win, at the same time, you would want to have trades that could give you the most bang for your buck. But looking for strategies like these might be impossible. What many profitable traders are preaching though is to look for a strategy with a decent win rate but could give you returns that are a multiple of what you have risked. The Holt Arrows Forex Trading Strategy is one of those strategies that could deliver a decent win rate and returns that could be more than twice your risk.
Holt Double Exponential Smoothing Trend
The Holt Double Exponential Smoothing Trend indicator is a custom indicator based on a modified exponential moving average. It is an oscillating indicator based on two exponential moving averages, each of which are weighted. This creates a smoothing effect on the moving averages, which gives traders a clearer view of the markets trend.
The Holt Double Exponential Smoothing Trend indicator plots histograms based on the two moving averages on its own window. These histograms oscillate around a midline at zero. Positive histograms indicate that the exponential moving averages are indicating bullish market tendencies, while negative histograms indicate bearish market tendencies.
Although this could be considered a lagging indicator, its strength is on how accurate it determines the trend. This is because the Holt Double Exponential Smoothing Trend indicator tends to react only when the trend is already established. This makes it an excellent trend filter, which could be paired with a complimentary indicator that could pinpoint entries.
ASC Trend Indicator
The ASC Trend indicator is a custom indicator which is based on the Williams’ Percentage Range indicator. Given that the Williams’ Percentage Range indicator is also an overbought and oversold indicator, much like Stochastic Oscillators, the ASC Trend indicator’s signals is also somewhat hinged on this idea. It also takes into consideration price’s recent highest highs, lowest lows and closing price.
The ASC Trend indicator conveniently pinpoints entry signals by placing arrows on the price chart. Whenever it detects a strong tendency for a bullish move, it would print an arrow pointing up, while if it detects a strong tendency for a bearish move, it would print an arrow pointing down.
Given the characteristics of the ASC Trend indicator, it seems to be an excellent indicator for generating entry signals. It pinpoints probable trend reversals at a point where the market is more likely to reverse. If you would notice it on a chart, it seems to be producing less signals than most indicators, yet these signals seem to be capable of producing high return trade entries.
Trading Strategy Concept
This strategy is a combination of decent probability trades as a result of filtering based on established trends and precise entries that could yield high return trades.
The primary trend filter that we will be using is based on the Holt Double Exponential Smoothing Trend indicator. Because this indicator tends to respond when the trend is already established, entry signals that are traded in agreement with this filter would usually have a better probability than those that are not couple with this indicator. As such, we will only be taking trades that are in agreement with the trend direction of the Holt Double Exponential Smoothing indicator.
As for the entry signal, we will be making use of the ASC Trend indicator. The ASC Trend indicator seems to be a fairly accurate indicator with a high probability of resulting into strong trends. This is because like the Williams’ Percentage Range, it also takes into consideration the overbought and oversold conditions of the market. Market extremes would often result into strong trends. Only ASC Trend signals that agree with the trend direction of the Holt Double Exponential Smoothing Trend indicator would be traded.
Indicators
- ASCTrend
- Risk: 15
- Holt_double_exponential_smoothing_trend
- Estimate period: 28.66
- Fractals
Timeframe: 15-min, 30-min, 1-hour, 4-hour and daily charts
Currency Pair: major and minor pairs
Trading Session: Tokyo, London and New York
Buy (Long) Trade Setup
Entry
- The Holt Double Exponential Smoothing Trend indicator should be printing positive histograms indicating a bullish market condition
- Open a buy order as soon as the ASC Trend indicator prints an upward pointing arrow
Stop Loss
- Set the stop loss at the fractal below the entry candle
Exit
- Close the trade as soon as the Holt Double Exponential Smoothing Trend indicator prints a downward pointing arrow
Sell (Short) Trade Setup
Entry
- The Holt Double Exponential Smoothing Trend indicator should be printing negative histograms indicating a bearish market condition
- Open a sell order as soon as the ASC Trend indicator prints a downward pointing arrow
Stop Loss
- Set the stop loss at the fractal above the entry candle
Exit
- Close the trade as soon as the Holt Double Exponential Smoothing Trend indicator prints an upward pointing arrow
Conclusion
This strategy is a strategy that agrees with the trend yet at the same time enters a trade with the consideration of a possible trend reversal. This results to a strategy with a decent win ratio and trade setups that are multiples of the risk placed on the trade. This allows traders to produce consistent profits on the long-term.
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