Hey now. I'm back with another trading system review. In 2005,
Alan Hull invented the Hull Moving Average,
which has exploded in popularity over the past decade.
I'm going to share with you a fellow viewers profitable trading system that uses
the HMA with an interesting variation of the RSI.
And be sure to stick around until the end to see my four optimization tips.
But right now just hit that subscribe button faster than Alex tries to avoid
these.
I call this system Alan's Lag and like most trading systems,
it can be applied to forex, crypto options, stocks, indices,
or any instrument that has significant volume and market participants.
This trading strategy uses two free TradingView indicators.
As always links and settings to all indicators are listed in the description.
The first indicator is the Hull Suite.
This custom indicator is capable of deploying multiple variations of the Hull
Moving Average. But for this system, inputs will be kept at default.
I'm going to change the color so you can see it more clearly.
The Hull Moving Average attempts to remove the lag from a Standard Moving
Average. The result is a more responsive study as compared to an SMA.
In this system, the HMA will be used for entry triggers.
The second TradingView indicator is the RSI Histo Alert Strategy.
I'm going to keep the inputs at default,
but thicken the lines of the histogram to see it more clearly. In addition,
I'm going to change the lines to zero, negative 10 ,and 10.
This custom indicator translates the data from the RSI and turns it into a
histogram. This study will provide entry confirmation.
Let's go over enter criteria and review some examples.
As always system rules and details are listed in the description below.
This chart is Euro versus the U S dollar five minute candles.
The rules to enter along on Alan's Lag are. First,
the HMA suite indicator must turn from a red sell to a blue buy. Second,
the RSI histogram must be at or above the 10 line on the
first candle where the HMA turns to a buy. This is our trigger candle.
Third, the stop is placed right below the HMA ribbon.
And we enter on the close of the trigger candle.
We close the trade when the first candle closes while the HMA Suite changes to a
Sell signal and you are in profit.
This setup winds up with a 2.7 risk to reward. If you enjoy this content,
please hit that like button.
I have one more long example. The HMA turns from a red sell to a blue buy.
The RSI histogram is above the 10 line. This is our trigger candle.
The stop is placed below the HMA ribbon and the trade is entered upon the close
of the trigger candle. Exit the position on the close of the candle,
where the HMA switches to a sell signal,
and this one hits a risk to reward of two.
Now we flip to shorts. This is what I will test for shorts.
We are looking for the HMA Suite to turn from a buy to a sell,
represented by blue to red. Second,
the RSI histogram must be at or lower than the negative 10 line on the first
candle where the HMA turns to a sell. This is our trigger candle. Third,
we place our stop right above the HMA ribbon and enter on the close of the
candle. Finally,
we close the trade when the first candle closes while the HMA ribbon has a buy
signal and the trade is in profit.
And this one winds up with a 1.36 risk to reward ratio.
I'm going to show you one more quick short example.
The HMA suite changes from blue to red. The RSI histogram is under the 10 line.
This is our trigger candle. The stop is placed above the HMA.
And we enter on the close of the candle.
And this trade is closed on the first HMA ribbon buy signal with a fantastic
risk to reward of 8.58.
I'm going to give you some great ideas on how we can make this system better
along with a Trader's Landing score. And now it's time to do what I do.
If you enjoy this content, please hit the light button.
Remember this is just 100 tests on one instrument.
If you are thinking of using this system,
please do all the required testing and be sure to let our community know what
you discover.
This test was done on Euro versus the U S Dollar five minute candles.
It took just short of half a year to find the 100 setups.
This data set provided four winners in a row and seven consecutive losing
trades, which is fine for a dynamic take profit strategy.
The winning percentage was underwater at 45%,
but the gain on account risking 2% per trade would have been an extremely
healthy 66%.
And I'm going to give you four tips on how to greatly improve these results.
The equity curve starts out with an extremely impulsive move up,
followed by just weak choppiness in an upward slope.
The reason for the super impulsive move up was this amazing trade that wound up
with an astonishing 29 risk to reward. Obviously,
if you catch this black Swan, it will shark up your account.
But what happens if we remove that one trade from the equity curve?
You can see that this system brings your balance back to break even more than
halfway through the 100 trades. And if you miss that huge winner,
the results look a lot different. What score would you give the strategy?
Let me know in the comments below.
I give this system a Trader's Landing score of six.
Because while I do not think the system is good by itself,
there are some nice features that can be expanded upon to get more consistent
profits. Remember the enemy of great is good.
I have four ideas on how we can improve this system.
Look at this chart from the back test.
You can greatly reduce the losses and thus have an extremely dramatic effect on
the equity curve.
If you exit the trade as soon as the HMA suite changes signals by closing your
trade here,
you would have gotten out with a very small loss rather than losing the entire
2% of the position. Second,
the VUManChu Swing Free Indicator that I featured in this video can be used as
an extra confirmation for entries.
Look at this chart where using the Swing Free Indicator gives you this signal
for a huge trend about to happen. Third, and this is more subjective.
But looking at this chart,
you can see that there is a huge gap between the HMA ribbon and price.
And this could be an indication that this entry signal is late,
and you missed most of the move. For a more objective view of this,
you could deploy an ATR ribbon maybe at two times the ATR for the settings.
The next optimization tip goes against what you see in most of my videos,
because this system is not a trend following strategy,
but rather more a countertrend strategy. Looking at this chart,
you can see that this is huge move would have been missed If you use the 200
EMA as a filter.
I had the 200 EMA on for much of the test just to see what would happen.
And this was common on many larger moves.
Check out this playlist for more profitable systems.
And have a great day because you deserve it.