Making Some System Changes! HLHB Version 3.0?

This week, the market’s attitude towards the Greenback was similar to how I feel towards immature boys – hate! The Greenback was sold-off across the board, particularly against the euro and the pound.

The only currency that the Greenback was able to win against was the yen… which really isn’t saying much since the yen practically lost against every other currency out there too!

Why did this happen?

I think it’s due to the fact that inflation in Europe and U.K. is has gone above their respective central banks’ inflation targets! When inflation rises, central banks usually respond by raising rates, which is bullish for the domestic currency. One news report I read also said that the European Central Bank (ECB) is expected to hike rates in their next meeting.

In other news, I’ve been receiving a lot of feedback on my HLHB system. Some of y’all think it could be more profitable if I do some modifications. And I agree… So for the next week or so, I’m going to backtest the new rules of my HLHB system.

Going with what one of my readers suggested in one of my previous blog post, here are the changes I plan to make on my HLHB system:

  1. Entries will still be based on moving average crossovers. But this time, I want the HLHB to generate more signals so I’m gonna change my SMAs to 5 and 21.
  2. Replace Stochastic with RSI. I know that the oscillators are like two peas in a pod, but I’m not gonna pay attention to price being oversold and overbought. Instead, I’ll use the RSI to confirm a trend.
  3. If the RSI is above 50, that means the pair is on an uptrend and I should go long. On the other hand, if the RSI is below 50, I would take that as a sign that the market is on a downtrend and use that as confirmation to go short.
  4. I’m keeping my filter but instead of 30 pips, I’m gonna reduce it to just 20. So if there’s an upward crossover and RSI is above 50, my buy order will be set 20 pips ABOVE the high of the crossover candle.

I’ve also decided to include the THREE succeeding candles after the crossover instead of just one. Why three? Well, it’s so that my 20-pip filter could cover both the European and U.S. sessions. Looking back, I noticed that I missed a few trades because the trend during the U.S. session wasn’t sustained in the Asian session due to the lack of volatility.

Here’s some sample setups:

EUR/USD 4-hour Chart

The first one was a valid setup to go long as there was an upward crossover and RSI was above 50. My entry would have been triggered right after the crossover as the following candle closed 20 pips above the high of the crossover candle. The second one also fulfills my entry requirements, but it would have been for a short trade.

On the other hand, the last setup would have been invalidated as the next three candles following the crossover didn’t go above 20 pips the high of the candle.

As for my exit rules, I think I’ll keep them as they are. My stops will be set 10 pips below/above the low/high of the candle before the crossover candle and I’ll cap my max stop to just 150 pips. So I’ll go with whichever is smaller.

All right, that’s it. So for the next week or so, I’m gonna be busy backtesting the new HLHB system. If it shows promise, I will forward test it. If it doesn’t, then I’ll go back to the original HLHB. Wish me luck!

  • Packygee

    what do you mean when you say “filter”? price didnt meet 20pip filter. Ive looked everywhere and cant quite figure it out.

  • pipsinvestigator

    Pips investigator

  • Anonymous

    Pips investigator

  • pipsinvestigator

    Pips investigator…. .@ Huck, congrats on your new HLHB system, help everything goes well with your backtesting. I just wanna give you some tips that you could add to your trading system before backtesting…

  • Anonymous

    Pips investigator… Tip 1 – Try reducing the 21sma as it is late in giving good Entry and Exits considering the fact that you would still pass your 20 pips filter before it is counted Valid.
    Tip 2- I think you know using 21 sma would allow retracement and gives you the current directional bias but it lacks the power to pinpoint E&E, so it should be used used more as minor S&R, instead of Pinpointing E&E

  • pipsinvestigator

    Pips investigator

  • mrchilled

    Can you clarify:

    – what time frames this will apply to (it looks like it’s 4hr)
    – what currency pairs

    Thanks and look forward to seeing the results

  • Packygee

    what do you mean when you say “filter”? price didnt meet 20pip filter. Ive looked everywhere and cant quite figure it out.

  • pipsinvestigator

    Pips investigator

  • Anonymous

    Pips investigator

  • pipsinvestigator

    Pips investigator…. .@ Huck, congrats on your new HLHB system, help everything goes well with your backtesting. I just wanna give you some tips that you could add to your trading system before backtesting…

  • pipsinvestigator

    Pips investigator

  • pipsinvestigator

    Pips investigator… Tip 1 – Try reducing the 21sma as it is late in giving good Entry and Exits considering the fact that you would still pass your 20 pips filter before it is counted Valid.
    Tip 2- I think you know using 21 sma would allow retracement and gives you the current directional bias but it lacks the power to pinpoint E&E, so it should be used used more as minorS&R, instead of Pinpointing E&E

  • Anonymous

    Pips investigator… Tip 1 – Try reducing the 21sma as it is late in giving good Entry and Exits considering the fact that you would still pass your 20 pips filter before it is counted Valid.
    Tip 2- I think you know using 21 sma would allow retracement and gives you the current directional bias but it lacks the power to pinpoint E&E, so it should be used used more as minor S&R, instead of Pinpointing E&E

  • pipsinvestigator

    Pips investigator

  • Anonymous

    pips investigator……….. Tip 3 – (Though i dont use Rsi )I think The Rsi was a good choice as it doesnt gives much fakeout. Tweaked the level line to 80,20 and 50. So you would know when price reach the extreme value 80/20 price is probably meant to reverse or retrace and below or above 50 level line to indicate Trend Reversal

    Tip 4 – Your crossover seems to work best on the Euro/Usd. Keep a keen Eye

    Tip 5 – If you love your 5/21 MA CrossoVER, then i would advise you look for a better Exit methods

  • pipsinvestigator

    Pips investigator

  • pipsinvestigator

    pips investigator……….. Tip 3 – (Though i dont use Rsi )I think The Rsi was a good choice as it doesnt gives much fakeout. Tweaked the level line to 80,20 and 50. So you would know when price reach the extreme value 80/20 price is probably meant to reverse or retrace and below or above 50 level line to indicate Trend Reversal

    Tip 4 – Your crossover seems to work best on the Euro/Usd. Keep a keen Eye

    Tip 5 – If you love your 5/21 MA CrossoVER, then i would advise you look for a better Exit methods

  • mrchilled

    Can you clarify:

    - what time frames this will apply to (it looks like it’s 4hr)
    – what currency pairs

    Thanks and look forward to seeing the results

  • pipsinvestigator

    Pips investigator

  • pipsinvestigator

    Pips investigator… Tip 1 – Try reducing the 21sma as it is late in giving good Entry and Exits considering the fact that you would still pass your 20 pips filter before it is counted Valid.
    Tip 2- I think you know using 21 sma would allow retracement and gives you the current directional bias but it lacks the power to pinpoint E&E, so it should be used used more as minorS&R, instead of Pinpointing E&E

  • Anonymous

    pips investigator……….. Tip 3 – (Though i dont use Rsi )I think The Rsi was a good choice as it doesnt gives much fakeout. Tweaked the level line to 80,20 and 50. So you would know when price reach the extreme value 80/20 price is probably meant to reverse or retrace and below or above 50 level line to indicate Trend Reversal

    Tip 4 – Your crossover seems to work best on the Euro/Usd. Keep a keen Eye

    Tip 5 – If you love your 5/21 MA CrossoVER, then i would advise you look for a better Exit methods

  • pipsinvestigator

    Pips investigator

  • pipsinvestigator

    pips investigator……….. Tip 3 – (Though i dont use Rsi )I think The Rsi was a good choice as it doesnt gives much fakeout. Tweaked the level line to 80,20 and 50. So you would know when price reach the extreme value 80/20 price is probably meant to reverse or retrace and below or above 50 level line to indicate Trend Reversal

    Tip 4 – Your crossover seems to work best on the Euro/Usd. Keep a keen Eye

    Tip 5 – If you love your 5/21 MA CrossoVER, then i would advise you look for a better Exit methods

  • edkhoo168

    What period you use for your RSI setting?

  • edkhoo168

    What period you use for your RSI setting?

  • InnerCircleTrader

    I’m rooting for you Huck! ;)

    GLGT

  • edkhoo168

    What period you use for your RSI setting?

  • edkhoo168

    What period you use for your RSI setting?

  • InnerCircleTrader

    I’m rooting for you Huck! ;)

    GLGT

  • RestInPips

    Hi Huck,

    RSI(14) gets sometimes tricky around its reading 50 so would allow some space for better trend identification.I would consider Bull Range (RSI reading between 40-100) and Bear Range RSI reading between 0-60)

    To ilustrate: RSI crossing above 60 could be a valid long entry signal (since it no longer belongs to the Bear Range)

    My backtesting of the Euro supports this theory.

    Good Luck,

    Rest

  • RestInPips

    Hi Huck,

    RSI(14) gets sometimes tricky around its reading 50 so would allow some space for better trend identification.I would consider Bull Range (RSI reading between 40-100) and Bear Range RSI reading between 0-60)

    To ilustrate: RSI crossing above 60 could be a valid long entry signal (since it no longer belongs to the Bear Range)

    My backtesting of the Euro supports this theory.

    Good Luck,

    Rest

  • Huck

    @Packygee My buy(sell) orders are set 20 pips above(below) the high (low) of the crossover candle. I have this in my HLHB rules to minimize fakeouts. In that sense, I see it as a filter that helps me confirm a trend.

    @Pipsinvestigator Thanks for the tips! I’ll see if the 21 and 5 SMAs and RSI work out first. If they don’t, I’m gonna go with your suggestions.

    @mrchilled Yep! I’m gonna focus on the 4-hour chart and just test it on EUR/USD :) I’ll keep you posted!

    @edkhoo168 Sorry, I totally forgot to specify that. I’m using 9. Thanks for pointing it out!

    @innercircletrader: Thank you so much! Hopefully it works! *fingers crossed*

    @restinpips Interesting suggestion. I think I’ll try that after I backtest. Thank you!!!

  • Huck

    @Packygee My buy(sell) orders are set 20 pips above(below) the high (low) of the crossover candle. I have this in my HLHB rules to minimize fakeouts. In that sense, I see it as a filter that helps me confirm a trend.

    @Pipsinvestigator Thanks for the tips! I’ll see if the 21 and 5 SMAs and RSI work out first. If they don’t, I’m gonna go with your suggestions.

    @mrchilled Yep! I’m gonna focus on the 4-hour chart and just test it on EUR/USD :) I’ll keep you posted!

    @edkhoo168 Sorry, I totally forgot to specify that. I’m using 9. Thanks for pointing it out!

    @innercircletrader: Thank you so much! Hopefully it works! *fingers crossed*

    @restinpips Interesting suggestion. I think I’ll try that after I backtest. Thank you!!!

  • RussIT

    Hi Huck

    good luck with the new improved system.
    I was wondering if you had made an EA for this sytem or is it a manual system?

    russ

  • RussIT

    Hi Huck

    good luck with the new improved system.
    I was wondering if you had made an EA for this sytem or is it a manual system?

    russ

  • Huck

    @RussIT

    For now, it is a manual system. I am not a programmer and I don’t think I’ll ever be… :( Maybe I can get a friend or reader of mine to help me make the EA… But that’s for another time!

  • Huck

    @RussIT

    For now, it is a manual system. I am not a programmer and I don’t think I’ll ever be… :( Maybe I can get a friend or reader of mine to help me make the EA… But that’s for another time!