Swing trading with heiken ashi and stochs

Thanks for the warning. Too many holidays, too many Fridays...

Kept my AUDUSD short alive through NFP as I had reset to BE & was about 33 pips up. Volatility spike was about 20 pips before it continued down. Pic taken just before it hit my TP @ 1.20000 for 66 pips profit (didn't mean to snap this on the M5, but I was watching it closely).

Entered this trade on a H1 pullback, backed up by daily & weekly trend (plus an opinion of the fundamentals). Very Happy with this trade & the week.

Have a good weekend.

Nice. 66 pips instead of break even, got to love nfp!

Dual Time Frame Momentum System with Heiken Ashi and Stochs

Ok, this is what I should have called the thread in the first place. I've spent hours and hours of my time thinking and testing variations of the original system using different timeframes and different configurations of indicators. I believe this may be the final system.

The dual time frame momentum system is from a book by R Miner called High Probability something or other. It's a good read for the first few chapters and then he goes off into some weird fibonacci fantasy world of his own creation. I'm sure it works for him but it just looks too wacky for me. Anyway, the best bit of the whole book is his dual time frame momentum system. This simply involves using an oscillator on a higher timeframe, such as stochs on the daily chart. When the higher timeframe oscillator gives a buy or sell signal you drop to the lower timeframe, such as the 1 hour and wait for the same oscillator to turn in the direction of the higher timeframe momentum. At this point he deems the minimum conditions have been met for a trade and uses his own method to look for a trade.

Having used the original Swing Trading with HA and stochs system for a good period of time I know it works fine in trending markets but there was always the question of how do you know when a market might trend and how do you know when the trend may be coming to an end? Using the method above I believe we can answer that question with the help of our friend.

So, the final system is almost as simple as the original. You wait for a stoch cross and ha change in any direction on the daily chart. You do not take the trend into consideration because countertrend moves on the daily chart can lead to good strong tradeable trends on the hourly chart.

Once the above has happened you move to the original Swing trading with HA and stochs template with the 100 sma, etc. You then trade every stoch cross no matter where on the scale it occurs, in fact you can even take the stochs off the hourly chart and just use Stoch Crossing.mq4 which will alert you to a stoch cross. The heiken ashi must agree with the direction. Enter and hold until either the stochs cross again and/or the heiken ashi changes. On longer runs you will need some discretion with the exits because the heiken ashi may still look healthy even though the stochs have crossed. This is because price can move down in a smooth HA move longer than the lookback period of the stochs can keep up.

Keep taking entries as long as the daily stochs and HA are moving in the same direction. As soon as the daily stochs become overbought or oversold then exercise caution on the hourly chart. If the HA is still moving down then continue to trade the trend on the hourly chart.

The goal of this method is to capture the impulse moves on the hourly chart that will push the daily chart in the direction of the daily timeframe momentum. I recommend a 30 pip stop loss and don't be too keen to get to break even. If you move to break even too quickly you risk being spiked out and for the most part you will have an exit signal before your 30 pip stop is hit anyway.

The timeframes can be changed at your discretion, play around until you find something that suits you. Daily and hourly are good for me.

I will post some charts in the next few posts.

I like to use this on pairs that trend well such as eurusd, euraud and audusd.

Here's a chart of audusd on the daily with a sell signal marked. We move to the hourly chart and start trading to the downside.

Next is audusd hourly. The red line is the end of the day that gave the signal. Bear in mind that you need to put the line on the daily on the candle after the signal day and then that marks the start of the first tradeable day on the hourly when you switch timeframes, it's confusing at first but try it and think about it and it makes sense.

There are 4 entries there marked in green. The first two would have given reasonable profits. The third was a small loser and the 4th was another reasonable win. The last day there was NFP day so not traded.

Sometimes the profits will be larger, sometimes smaller and sometimes there will be more losses but if you consistently follow the system you will make money.

Try it for yourself, pick any pair that trends reasonably, mark a daily buy or sell signal then go to the hourly chart and see what would have happened had you taken every signal in the same direction. You will see the losses are usually small but the winners can be large.

I will post more as I go along. I will be personally trading this system and this system alone for the forseeable future so I will be here to anwser questions.

I think that would have worked well on AU last week. At least one good trade / day from the open on Monday. Edit: Ok - now I see your chart, which was exactly what I was thinking of...

Lol, yep, try it on any pair that trends nicely such as euraud and you will see that not every signal on the daily leads to a good trend on the hourly but in most cases then you wouldn't get any signals on the hourly. When you do get a good move on the daily that translated to a good tradeable trend on the hourly with lots of pips banked in most cases.

Here is euraud daily marked with every stoch cross that coinicided with a half convincing HA change.

The first trend is just too long to go through every trade but do you think you could have made money trading this to the short side?

Here's an example of a choppy period on the daily but viewed on the hourly chart. After the big move down you get a stoch cross to the upside and you're looking for longs away from the 100 sma. No signals.

Next is a small move down, clear stoch cross on the daily but it doesn't translate to a clear trend on the hourly, not really any clear signals, anything you took wouldn't have made you much but you probably wouldn't have lost much either.

Last one. Here's euraud from the same period, one of the moves up. The green vertical lines are the period for which the daily stochs were crossed and heading up, ie the daily momentum was bullish.

The first day is marked with a blue rectangle, a few trades, an overall directional up bias but not much money to be made. Overall I'm guessing you'd have taken 3 trades and more or less broken even or made a small profit or a small loss on the first 2 and the last one went ok.

The second day gave us a nice clear trade, pips banked.

The third day gave us another nice clear trade.

The fourth day gave us two trades, first one not much better than break even, a few pips banked maybe but then the last trade of the sequence gives us a lovely move up.

So you can see, when the daily gives a clear stoch cross and HA change it may or may not translate into a nice trend on the hourly chart. If it does then you will catch some nice moves. If i doesn't then the sideways price moves on the hourly chart should keep you out of a lot of bad trades.

You will have losing trades here and there but they are limited in size, never more than 30 pips and often losing maybe 10 pips or breaking even. The upside can be as much as 50 to 100 pips.

Go through any pair you like that trends well and you will see how well it works.

I'm noticing the default settings on the Stoch crossing indi are defaulting to 30,10,10. I assume you have them edited to 8,3,3.

Yes, the settings are low/high too. Here's the exact settings I use, I altered the code to suit myself.

This is something I did not know:

Q: Can I quickly look up a position from the account history on the chart?

A: Yes. All you have to do is drag-and-drop the ticket (a unique identifier for each position, order or non-trading transaction assigned by server and displayed in the client terminal) of the position to the chart. MetaTrader4 will draw entry and exit markers.

http://www.forexclub.biz/faq#t311n367

HB, I like your method of using the D1 chart & Stoch crossover to establish the trend. The chart I've attached is a bit messy as I'm just experimenting, but uses the MTF Stoch set to 1440 (D1) on a H1 chart. In this case I'm experimenting with standard candles & the HA Oscillator but you could just use HA candles instead.

Perhaps you use your method first, or just have the D1 Stoch on your H1 chart. Once the D1 Stoch has crossed over, you look for trades on the H1 using the H1 Stoch cross over or HA candle colour (color?) change - both seem to give he same result.

(Note: No account take of S/R on this example.)

I've only indicated entries on the chart. Depending on you SL, this could be one trade or 5. I'll be interested to try it when the market is open to see if it's any benefit

Anyway, just take it as an endorsement of your system but with an alternative view.

Same chart as above, but with HA candles & no HA Oscillator.

Looks easy when the market is closed!

Ok, I like that, that's pretty cool.

Ozefex, I really like the look of the daily stochs on the hourly chart but if you think about it the daily stochs aren't going to change much throughout the day, it's the hourly you need to concentrate on so you don't really need them. I've been concentrating on keeping the spirit of the original system but finding a more intelligent way to trade it. The system remains very similar, you trade stoch crosses and ha changes on the hourly but you do it in the direction of the daily momentum. Also I've been concerned with keeping it simple. The beauty of the original system is that it uses 1 ma, 1 oscillator and HA candles and nothing else required. It's nice to have more chart space for the actual price! At the end of the day any variation people want to adopt is no problem, as long as it enhances the system in some way, makes it easier to use or more profitable. Thanks for posting your take on it, let's bank some pips next week!

Hi Hugh,

I recently discovered your thread and found it to be very simple and straight forward in its approach. I was wondering if anyone had any stats after 3 months of trading re: the 3 different money management methods you mentioned in your first post. I have never been able to settle on one method consistently for exiting a trade. Recently I've been trading 3 lots and taking 2 off at the 1st profit target and moving to BE + 5 pips and trailing the 3rd lot at the high/low of 2 candles back. Any and all responeses are welcomed.

Thanks,
Mike