Partner Center Find a Broker

Greetings, ladies and gents! As promised, here are the updated rules for the The Happy Hunter Price Action System (Fixed TP Variant).

Oh, if you’re looking for the updated rules of the Trailing Variant, you can check them out by clicking on the link below:

The Happy Hunter Price Action System 3.1 (Trailing Variant)

Anyhow, here are the topics we’ll be discussing today. Feel free to skip ahead to the trading rules, but just note that there are some changes in definitions and calculations.

As for the core patterns, parameter/assumption, and statements/disclaimers, there’s really nothing new there.

List of Changes

For your convenience, here are the list of changes. I noted only the somewhat major changes to the system in yesterday’s daily update, but below you’ll see minor ones as well that you may miss when going through the rules.

I’m pretty sure I covered all the changes, but I’m only human (and tired), so just shoot me a comment if I missed something, or if you need further clarification (or you just want to say “hi”).

  • Instead of exiting at breakeven, we get out at SW, which is (0.20 x ATRH) pips worth of gains. Small, but better than getting out empty handed. It does make the system slightly more vulnerable to wild intraday swings.
  • Break replaced by SWT in definitions
  • ATRH multiplier for the time limit on pending orders to be commuted from 12 hours to 2 hours reduced from 2.0 to 1.5. This is to counterbalance the more “aggressive” nature of the system due to the more relaxed rules on Entry Type 2.
  • For Entry Type 2, removed the confusing overlap with Entry Type 1 by removing the requirement that the original HHHL or LHLL pattern has to comply with Entry Type 1.
  • If the original HHHL or LHLL pattern does not comply with Entry Type 1, then no pending orders will be placed. But if it does, then the original HHHL or LHLL pattern is treated as an order based on Entry Type 1.
  • Also for Entry Type 2, the original HHHL or LHLL pattern would only be deemed broken if the penetration is greater than 2 pips. This is mainly to make the test results somewhat more “universal” since discrepancies in the price data feed can sometimes result in significantly different results.
  • Also for Entry Type 2, there was no time limit on the effectivity of Entry Type 2. However, thanks to helpful insight from reader mrie, Entry Type 2 orders will only be effective for 12 hours. If an HHHL or LHLL pattern forms after the 12-hour time limit, they need to comply with the rules for Entry Type 1, even if the original HHHL or LHLL pattern that’s the basis for Entry Type 2 is still intact. (Note: Was originally 24 hours, but reduced to 12 to compensate for relaxed rules on Entry Type 2).
  • For Entry Type 4, clarified that the IB needs to form consecutively
  • Entry Type 5 uses P1 x 2, so the trade filter is 2 pips, not just 1 pip.
  • This applies mainly to those who are planning to make an EA, but clarified that buy stop orders and sell stop orders are not the only orders allowed. If it’s impossible to place a buy stop or sell stop order because, say, of the spread or the candle opened very close to the entry price, then market orders are the way to go.

A Couple of Statements/Disclaimers

Firstly, I make no claim to the profitability of this system (I’m forward testing it after all), so if you use the system to trade real money without doing your own tests, that’s on you, whether you lose money or get lucky and make money

Secondly, there’s no central exchange for the forex market, so there may be discrepancies in our data feed, and it’s highly probable that I may have a valid signal based on my charts where none exist on yours (and vice versa)

Parameters/Assumptions

  • Currency pair for the tests is GBP/NZD and only GBP/NZD
  • We only use the 1-hour chart to trade
  • Trading day begins at 12:00 am GMT+2 and ends at 11:00 pm GMT+2
  • Starting account balance is $10,000
  • Max risk per trade is $50 or 0.50% of starting account
  • The lot size is variable, so learn to use (and love) the Position Size Calculator
  • As I’ve been stressing since I laid down my plans in My 2018 Trading Resolution, I’m assuming a fixed spread of 12-pips in all my tests; this system was designed with strict cost control in mind, so variable/floating spread wasn’t even considered
  • In cases where there are weekend gaps that would make the trade invalid (i.e. the market opens way beyond the TP or SL level), it’s assumed that the broker cancels pending orders, just like most of them usually do in real world conditions
  • But for orders that were filled before the weekend gaps, it’s assumed that we get out at TP (even if the gap greatly favors the trade) or at SL (even if the gap is not in favor of the trade) because it’s assumed that the broker guarantees our exit levels, well, that or it’s assumed that we complain and/or threaten to close out our account with the broker

The Core Patterns

This trading system uses price patterns known as Higher Highs, Higher Lows (HHHL) and Lower Highs, Lower Lows (LHLL), as well as the Inside Bar (IB) pattern to enter trades.

The HHHL pattern has the following elements:

  • The high of the recently closed candle must be higher than the high of the previous candle
  • The low of the recently closed candle must be higher than the low of the previous candle
  • The recently closed candle is designated as the signal bar

Pretty simple, right? Here’s an example to help you out:

The LHLL pattern, meanwhile, is just the opposite of the HHHL pattern, and it has the following elements:

  • The high of the recently closed candle must be lower than the high of the previous candle
  • The low of the recently closed candle must be lower than the low of the previous candle
  • The recently closed candle is designated as the signal bar

And here’s an example:

As for the IB pattern, it has the following elements:

  • The high of the recently closed candle must be lower than the high of the previous candle
  • The low of the recently closed candle must be higher than the low of the previous candle
  • The recently closed candle is designated as the signal bar

Basically, we’re referring to these candlestick formations:

Inside Bar

Definitions

Take note of the following since I’ll be using them constantly when explaining the rules of the system.

  • HHHL – Higher Highs, Higher Lows candlestick pattern
  • LHLL – Lower Highs, Lower Lows candlestick pattern
  • IB – Inside Bar candlestick pattern
  • ATRH – 120-period average true range on 1H chart
  • SBar – Signal Bar or candle
  • Bar1 – the previous candlestick; the candle to the left of the signal bar
  • Bar2 – the candle previous to Bar1
  • Bar3 – the candle previous to Bar2; you get the idea…
  • SL – stop loss level
  • TP – target profit level
  • SW – small win; instead of getting out of a profitable trade at breakeven, we get out with a small win
  • SWT – small win trigger, price level the pair needs to reach before you can move your SL to SW
  • P1 – this is simply a 1-pip filter for our entries
  • RSL – reduced stop loss; basically just reduces risk by half
  • RSLT – reduced stop loss trigger;  price level when you can move your SL to RSL

Computing for TP, SL, SW, SWT, RSL, RSLT

Yes, this trading system requires you to calculate a lot. No worries, right? If you’re into forex trading, then you probably have an affinity for (or can at least tolerate) numbers.

And besides, we’re only doing basic algebra that little kids are expected to learn in school. It’s not like we’re using calculus or statistics, right? Although I know somebody who does.

Okay, here is how we compute for our TP, SL, SW, SWT, RSL, and RSLT.

If going long:

  • TP = Entry – spread – P1+ (ATRH x 1.9)
  • SL = Entry – spread – P1 – (ATRH x 1.3)
  • SW = Entry + (ATRH x 0.2)
  • SWT = TP – (ATRH x 0.2)
  • RSL = Entry – spread – P1 – ((ATRH x 1.3) x 0.5)
  • RSLT = Entry – spread – P1 + ATRH

If going short:

  • TP = Entry + spread + P1 – (ATRH x 1.9)
  • SL = Entry + spread + P1 + (ATRH x 1.3)
  • SW = Entry – (ATRH x 0.2)
  • SWT = TP + (ATRH x 0.2)
  • RSL = Entry + spread + P1 + ((ATRH x 1.3) x 0.5)
  • RSLT = Entry + spread + P1 – ATRH

Trading Rules for Long Positions

Long Entry Type 1 (LHLL)

  • If an LHLL pattern forms
  • And the lows of the four candles prior to the SBar are higher compared to the low of the SBar
  • Then set a buy stop order at Bar1 High + P1 + spread
  • After that, compute for and place the SL and TP
  • Note: If putting a buy stop order is impossible because price is too close, then just be ready to use a market order to get in at the precalculated price level
  • Make sure to compute for SWT and RSLT so that you know when to reduce risk
  • However, if the buy stop order is not triggered 12 hours after SBar formed, then cancel the order
  • But if (Bar1 High – Sbar Low) is greater than or equal to (1.5 x ATRH), then orders should be cancelled after 2 hours, not 12 hours
  • Moreover, if a new LHLL pattern forms after the previous one, and the existing buy stop order hasn’t been triggered yet, then reset everything based on the newer LHLL pattern

Long Entry Type 2 (LHLL Within LHLL)

  • If an LHLL pattern forms
  • And another LHLL pattern later forms inside the LHLL pattern
  • Then set a buy stop order at Bar1 High + P1 + spread, based on the newer LHLL pattern
  • After that, compute for and place the SL and TP
  • Note: If putting a buy stop order is impossible because price is too close, then just be ready to use a market order to get in at the precalculated price level
  • Make sure to compute for SWT and RSLT so that you know when to reduce risk
  • However, if the buy stop order is not triggered 12 hours after the SBar of the new LHLL pattern formed, then cancel the buy stop order
  • Note1: Place buy stop orders for all subsequent LHLL patterns, as long as price does not go higher than (Bar1 High + 2 pips) or lower than (Sbar Low – 2 pips) of the original LHLL pattern and as long as the newer LHLL pattern did not form consecutively
  • Note2: You can only open orders based on the subsequent LHLL patterns 12 hours after the original LHLL pattern formed. If an LHLL pattern forms after the 12-hour time limit, they need to comply with the rules for Entry Type 1, even if the original LHLL pattern that’s the basis for Entry Type 2 is still intact.

Long Position Entry Type 3 (Reversal IB)

  • If an IB pattern forms
  • And the lows of the four candles prior to Bar1 are higher compared to the low of Bar1
  • Then set a buy stop order at the high of Bar1 + P1 + spread
  • After that, compute for and place the SL and TP
  • Note: If putting a buy stop order is impossible because price is too close, then just be ready to use a market order to get in at the precalculated price level
  • Make sure to compute for SWT and RSLT so that you know when to reduce risk
  • However, if the buy stop order is not triggered 1 hour after SBar formed, then cancel everything

Long Position Entry Type 4 (IB Within IB)

  • If you find an IB pattern that complies with the rules for Entry Type 3 or Entry Type 5
  • But if a new IB pattern consecutively forms inside the IB pattern
  • Then set a buy stop order at the high of Bar1 + P1 + spread, based on the newer IB pattern
  • After that, compute for and place the SL and TP
  • Note: If putting a buy stop order is impossible because price is too close, then just be ready to use a market order to get in at the precalculated price level
  • Make sure to compute for SWT and RSLT so that you know when to reduce risk
  • However, if the buy stop order is not triggered 1 hour after the SBar of the new IB pattern formed, then cancel everything
  • If yet another IB pattern forms within the second IB pattern
  • Then place a buy stop order based on the newest IB pattern
  • Note: The 1-hour time limit applies for each subsequent IB pattern, which means that the pending orders based on the older IB patterns are promptly cancelled.

Long Position Entry Type 5 (Continuation IB)

  • If an IB pattern forms
  • And the highs of the 12 candles prior to Bar1 are lower compared to the high of Bar1
  • Then set buy stop order at the high of Bar1 + (2 x P1) + spread
  • After that, compute for and place the SL and TP
  • Note: If putting a buy stop order is impossible because price is too close, then just be ready to use a market order to get in at the precalculated price level
  • Make sure to compute for SWT and RSLT so that you know when to reduce risk
  • However, if the buy stop order is not triggered 1 hour after SBar formed, then cancel the order

Trading Rules for Short Positions

Short Entry Type 1 (HHHL)

  • If an HHHL pattern forms
  • And the highs of the four candles prior to the SBar are lower compared to the high of the SBar
  • Then set a sell stop order at Bar1 Low -P1
  • After that, compute for and place the SL and TP
  • Note: If putting a sell stop order is impossible because price is too close, then just be ready to use a market order to get in at the precalculated price level
  • Make sure to compute for SWT and RSLT so that you know when to reduce risk
  • However, if the sell stop order is not triggered 12 hours after SBar formed, then cancel the order
  • But if (SBar High – Bar1 Low) is greater than or equal to (1.5 x ATRH), then orders should be cancelled after 2 hours, not 12 hours
  • Moreover, if a new HHHL pattern forms after the previous one, and the existing sell stop order hasn’t been triggered yet, then reset everything based on the newer HHHL pattern

Short Entry Type 2 (HHHL Within HHHL)

  • If an HHHL pattern forms
  • And another HHHL pattern later forms inside the HHHL pattern
  • Then set a sell stop order at Bar1 Low – P1, based on the newer LHLL pattern
  • After that, compute for and place the SL and TP
  • Note: If putting a sell stop order is impossible because price is too close, then just be ready to use a market order to get in at the precalculated price level
  • Make sure to compute for SWT and RSLT so that you know when to reduce risk
  • However, if the sell stop order is not triggered 12 hours after the SBar of the new HHHL pattern formed, then cancel the sell stop order
  • Note1: Place sell stop orders for all subsequent HHHL patterns, as long as price does not go lower than (Bar1 Low – 2 pips) or higher than (Sbar High + 2 pips) of the original HHHL pattern and as long as the newer HHHL pattern did not form consecutively
  • Note2: You can only open orders based on the subsequent HHHL patterns 12 hours after the original HHHL pattern formed. If an HHHL pattern forms after the 12-hour time limit, they need to comply with the rules for Entry Type 1, even if the original HHHL pattern that’s the basis for Entry Type 2 is still intact.

Short Position Entry Type 3 (Reversal IB)

  • If an IB pattern forms
  • And the highs of the four candles prior to Bar1 are lower compared to the high of Bar1
  • Then set a sell stop order at the low of Bar1 – P1
  • After that, compute for and place the SL and TP
  • Note: If putting a sell stop order is impossible because price is too close, then just be ready to use a market order to get in at the precalculated price level
  • Make sure to compute for SWT and RSLT so that you know when to reduce risk
  • However, if the sell stop order is not triggered 1 hour after SBar formed, then cancel everything

Short Position Entry Type 4 (IB Within IB)

  • If you find an IB pattern that complies with the rules for Entry Type 3 or Entry Type 5
  • But if a new IB pattern consecutively forms inside the IB pattern
  • Then set a sell stop order at the low of Bar1 – P1, based on the newer IB pattern
  • After that, compute for and place the SL and TP
  • Note: If putting a sell stop order is impossible because price is too close, then just be ready to use a market order to get in at the precalculated price level
  • Make sure to compute for SWT and RSLT so that you know when to reduce risk
  • However, if the sell stop order is not triggered 1 hour after the SBar of the new IB pattern formed, then cancel everything
  • If yet another IB pattern forms within the second IB pattern
  • Then place a sell stop order based on the newest IB pattern
  • Note: The 1-hour time limit applies for each subsequent IB pattern, which means that the pending orders based on the older IB patterns are promptly cancelled.

Short Position Entry Type 5 (Continuation IB)

  • If an IB pattern forms
  • And the lows of the 12 candles prior to Bar1 are higher compared to the low of Bar1
  • Then set a sell stop order at the low of Bar1 – (2 x P1)
  • After that, compute for and place the SL and TP
  • Note: If putting a sell stop order is impossible because price is too close, then just be ready to use a market order to get in at the precalculated price level
  • Make sure to compute for SWT and RSLT so that you know when to reduce risk
  • However, if the sell stop order is not triggered 1 hour after SBar formed, then cancel the order