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The HILO strategy is a developed algorithm for the interaction of effective forex indicators included in the standard forex set. Thanks to the interaction with each other, the indicators quickly capture the current market trend and determine the optimal moment to open certain positions. Despite its effectiveness and the combination of joint calculations, the HILO strategy very easy to use, so the use of the strategy in trading will not be difficult for traders with any level of preparedness.
The HILO strategy can only be used in trading with the GBPJPY pair, as it does not show the desired results with other currencies. Also, the strategy can not be used on all timeframes, the most optimal of them is H1.
Strategy indicators
To make calculations, the HILO strategy uses only two indicators included in the standard Forex set. These are three moving averages with differently configured parameters and the ADX technical indicator. Thus, when these indicators interact, a signal is formed for certain actions.
- EMA (8) - fast exponential moving average with period 8 and price type Open.
- SMA (21) - simple moving average, the period of which is 21, and the price type is High.
- EMA (21) is a slow exponential moving average. Its period is 21, and the applied price is Low.
- ADX - technical indicator for determining the trend and its strength with the main and signal lines +D and -D, with a period of 14 and a level 15 added to the chart.
Trading with the Hilo strategy
Thanks to the use of the HILO strategy for calculating effective, time-tested indicators, it can be argued that thanks to it, it can be achieved the desired results without making any special efforts. Before trading using the strategy, it is recommended to study the scheme and algorithm of the indicators included in it, since strategies, they are used strictly for their intended purpose. First, it is needed to determine the current trend using the direction and intersection of the moving averages, after which, its strength using the ADX indicator, and only then, taking into account the location of the price relative to one of the moving averages, a certain position can be opened.
Conditions for Buy trades:
- The fast exponential moving average crosses the slow one and settles above it.
- The current candle should close above the simple exponential moving average.
- The ADX indicator is above level 15, and its signal +D is above -D.
After receiving such conditions, a long position can be opened on the candlestick after the signal one. It should be closed with a stop loss at the point of a recent local minimum, after the reverse intersection of the exponential moving averages. This will indicate a possible change in the direction of the trend, which makes it possible to open new positions.
Conditions for Sell trades:
- EMA (21) crosses with EMA (8) so that the slow moving average is higher than the fast one.
- The current candle should close below the SMA (21).
- The ADX indicator lines are above level 15, but the –D line is above the +D line.
After such conditions are obtained on a certain candle, a short position can be opened on the candle after it. Stop loss should be set at the point of a recent local maximum. Such a trade should be closed after receiving a reverse intersection of EMA (8) and EMA (21), since in this case a change in the current trend is expected, and at this moment it can be considered opening new trades.
Conclusion
The HILO strategy, when applied correctly, has a positive effect on the profitability of the trade. However, it should be borne in mind that the strategy is designed to work only with the GBPJPY pair on the H4 timeframe, and not with any pair or timeframe it can be achieved the desired result. Despite the fact that in strategies use easy-to-learn indicators, it should not be neglected the practice on a demo account, which will allow acquiring all the necessary trading skills.
