Huck's Trading Plan
HLHB Mechanical System
Which timeframe do you use most often?
I'll be working with the EURUSD pair on this system and I'll make use of its 4-hour chart. I'll also make use of the following tools:
- 20 EMA applied to the close
- 10 EMA applied to the close
- Slow Stochastics with parameters 14, 3, 3
Which analysis methods or trading systems will you use to determine the direction bias and entry/exit levels?
I keep hearing that "the trend is your friend" so I decided to come up with a system that would allow me jump in a trade based on the general direction of the price movement. I'll be combining a trend-following indicator (moving averages) with an oscillator (stochastics) for confirmation. On top of that, I'll be adding filters in order to avoid fakeouts.
What is your potential entry setup?
Basically, I will use the two EMA's (10 and 20) on the 4-hour chart to determine when to buy or sell. I'll also include a couple of filters to avoid getting faked out. Who wants to get faked out anyway? Getting faked out in a trade is just as bad as getting "flaked out" on a date. But that's another story, for another time...
Describe how you will determine your stop loss points.
My stop loss points would be set 10 pips above / below the low / high of the candle BEFORE the crossover candle. If that happens, I believe my trade idea is invalidated. My stop cannot exceed 150 pips. Below are examples of where I would put my stop loss orders.
Describe your profit taking strategy.
Profit targets are simple. I set my first profit target equal to the Average Daily Range of the pair, which is roughly around 150 pips for the EURUSD pair. Once that is hit, I will put a 150 pip trailing stop on my second position to ride the wave and create a risk-free trade.
What conditions will signal your entry trigger?
Anyway, the idea is to open two long positions whenever the following conditions are fulfilled: the fast 10 EMA (blue) crosses over the 20 EMA (red) from under and stochastics is in between 50 and 80. In order to avoid whipsaws and get additional confirmation, I'll set my orders 30 pips above the previous crossover candle's high (roughly 25% the pair's Average Daily Range).
Going short is just the doing everything the opposite way. This means I will open two short positions 30 pips below the previous crossover candle's low whenever the 10 EMA (blue) crosses over the 20 EMA (red) from above and stochastics is between 20 and 50.
What conditions will cause you to exit early (i.e. time stop, surprise news, shifts in sentiment or fundamentals, etc)?
I will stay on the sidelines when there are major economic reports due. These include interest rate decisions, GDP release, employment reports, and retail sales data. This would enable me to avoid unusual amounts of volatility which could wipe out my trade. If I have an open trade and a major economic report is coming up, I would close it before the report is released. This list is not set in stone as market conditions are always changing. A market moving report today might not be anymore tomorrow. I will be using BabyPips.com's Forex Calendar for this.