The HL 30 Forex trading system basics
The HL 30 Forex trading system basics
The HL 30 Forex trading system basics
This article will only outline the structure however please be aware that there are specific rules, tips and nuances to making this trading system work better than simply applying the information available here.
The name of this forex trading strategy refers to the time frame and a specific set up that must be in place in order to locate a trade. Specifically we are using a 30 minute time frame and we need to identify the previous days support and resistance/high and low in price.
Upon opening a brand-new chart and setting the system up, you need to identify the start of each new day. Use the industry standard of 5 p.m. New York time. I use a vertical line on the 30 minute chart exactly at 5 p.m. New York time.
The trade setup begins with noticing how price reacts when it approaches a previous day's high or low. There is a 10 pip range or zone that I use upon price approaching the high or low. What this means is price must not move any further than the 10 pips or less than the 10 pips, of the high or low from the previous day.
If it moves beyond this range or less than, I advise to ignore the trade and look for another opportunity. It doesn't mean that there will not be some kind of reversal or bounce at those levels with price breaking the 10 pip range, but for simple illustrative purposes and to begin this trading system with some structure in place I recommend following the 10 pip range rule.
Once you become more familiar with the system you can apply slight advanced techniques which will allow you to trade when price moves less than or beyond the 10 pip range.
Moving forward, if price is within the 10 pip range of the previous day's high or low it's time to start looking for a possible entry.
At this level, within the 10 pip range of the previous day's high or low, I'm specifically looking for one of two candle patterns. The first one is a bullish or bearish engulfing candle and the second is either a Morning Star or evening star pattern.
If either of these candle patterns develop at support or resistance of the previous day, I absolutely must wait for the candle pattern to close before trying to confirm or identify an opportunity.
The next step in confirmation is to use the CCI indicator. On the 30 minute chart I set it at 14.
Example:
if price is at the previous day's high I would potentially look for a bounce to trade price to the downside. Upon the closed completed engulfing candle, or evening star pattern, the CCI must read a lower measurement than the previous day's spike high candle. If the CCI reading is higher then I would leave the trade alone. It does not mean the price will continue to the upside and that it will not reverse or bounce, again were following strict rules in the beginning of learning a brand-new trading strategy.
So everything is in order, price is at our previous day's high, we have a close completed and bearish engulfing candle or evening star pattern and the CCI has a lower measurement than it did when price printed spike high on the previous day.
The entry:
the entry is up on the close completed candle pattern. Immediately when it closes, that is our entry.
Stop loss placement.
This is an obvious area for a great deal of debate.
Using this strategy myself, I have found that I could use a 25 pip stop loss on the Euro/USD. At the same time 25 pips is also my profit target.
Obviously from a technical point of view, we could argue that the stop loss should be a few pips above the high however as I said using this method myself over many years, 25 pips in most market conditions seems to do the trick.
Profit targets.
Using this strategy I'm always looking for a one to one risk to reward ratio however one of the keys to trading successfully is the use of several profit targets on every trade.
This scaling out method allows me the opportunity to maximize any potential trends that may be in place at the time I enter the trade and it also doubles the risk to reward.
If price continues after reaching the first target of 25 pips, I continue looking for an additional 25 pips. In most market conditions and at the time of this writing, this occurs approximately 85 to 90% of the time.
Each currency has an average distance it is capable of traveling within a given timeframe. Obviously certain events can have an impact and either minimize or expand that range but for the most part this trading strategy is a robust strategy that will hold up in most market conditions.
It is also important to understand which currency pair you are applying this strategy on. For example the Euro/JPY can move almost twice the distance as the euro/USD in most market conditions and the profit targets and stop loss levels need to be adjusted when using this strategy on that pair.
In my next article I will discuss additional rules for applying this strategy in uncertain market environments which account for the 15 to 20% of the time price does not achieve the second profit target.
Thanks for reading and please do not immediately apply this trading strategy or any other that you are unfamiliar with, to your trading account without research and clear understanding.
Good luck trading.
Forex Arthur.
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