From the very start of my forex education I have had it drummed into me higher highs higher lows means uptrend and lower highs lower lows down trend.
I looked into building a strategy around this and came up with a basic one
I looked at the daily chart for HH and LL and that would be my direction and switch down to 4 hour and look for a break of either the HH or LL during the counter trend
So I back tested Eur/Usd from mid 2009 till today, I got around 24 trades and I think it was 19 trades where I doubled my risk
All great but 24 trades over 8 years isn’t really much, Maybe going through all the other pairs will give better results.
But the one thing I noticed is most the time the price doesn’t move in HH or LL it will for example make a higher high then a lower low and then a higher high whilst in a uptrend which is what acted as a filter to stay out of trades.
I don’t have a question as such but I would love to here from swing traders how they tackle this and what everyone’s thoughts are
Markets only trend around 30% of the time, so I recommend having both a trend strategy and a range (or consolidation) strategy. Also, you can trade more than one pair. I watch 6 pairs for trades during my trade sessions. I don’t do a lot of swing trading, but if I did, my approach would be to trade 6-8 pairs, and take both trend and consolidation trades on the swing.
It’s hard to build a trade strategy through HH and LL because the volatility was already within that trend which will expose you to situations where bulls got exhausted or bears.
If you backtest it, you’ll notice that consolidation probably happen, then it will move upwards or downwards.
I reckon HH or LL is only good at analysing what the market thinks.
I will be going through all the other pairs when I get the time to see if it works across all pairs and also if it gives enough trades to make it worth my time.
After that I guess I will need to swot up on correlation and double check margins.
As for other conditions I will get to them, What I am doing is building up my trading tool box,
So far I Have one strategy I know gives good results there just isn’t enough trades to make a living out of it.
I did think of checking to see if it set up good scalping conditions but my 5 min charts don’t go that far back.
I missed out I was only taking trades based on strict rules, There was a couple of times a pattern formed or a double bottom so I would of got more trades with that.
I agree. A strict rule of following HH and LL in that sequence only was too random for me. When I looked at the trades that had won it was obvious that the best trades were those that followed larger scale trends, so that’s what i do. I don’t use HH/LL at all in confirming or assessing a trend, though they are useful in judging entry and stop-loss points - but only AFTER the decision to get into the trend.
I use 3 mandatory criteria and a range of secondaries. The mandatory criteria must be present. Each criterion that is present earns the trend “score” 1 point, either Bullish or Bearish. The trend with the highest score is the best, but its only the best for m y strategy - another strategy might demand different criteria and you could allocate more than 1 point to some of them if your strategy responds better that way.
Mandatory criteria -
is 20EMA above or below 50EMA? (above = 1 Bullish point, below = 1 Bearish point)
is 50EMA sloping upwards (Bullish) or downwards (Bearish)
is 50EMA above or below 200EMA?
Secondary criteria -
is price above/below 200EMA?
are at least 80% of the weekly Closes, Highs and Lows in the last 3mths above/below 50EMA?
are last 4 or more weekly bars unbroken by and above/below 50EMA?
are last 8 or more weekly bars unbroken by and above/below 50EMA?
are last 4 or more weekly Closes above/below 50EMA?
are last 8 or more weekly Closes above/below 50EMA?
does last weekly bar overlap fewer than 3 immediately previous weekly bars?
are clear majority of other pairs based on same base currency bullish or bearish according to 20/50EMA sequence?
Simple stuff really. Idea is each criterion should be objective: it is either bullish or it is bearish, no in-betweens. A strong currently bullish example would be GBP/CHF.
The aim is to allow trends to be ranked from best to worst in a more meaningful way than simply by % price change.
These criteria are not unique or magic. Any strategy would identify its own most appropriate criteria.
HH and LL reflect the battle of attrition between the bulls and the bears. So if you spot a very strong obvious trend, nobody has to tell jump straight in. Just make sure you have a trading plan for trading trends. Your trading plan represents your trading edge. IF your trading edge is present on the market, you should have no problem recognizing it.
HH and LL do work but only for the purpose of defining a trend. Once the trend is defined other techniques (often on lower TF s) must be used to identify an entry.
Its worth noting that if you are in a trade looking at HH and LL reversing or going flat makes an excellent way to identify the exit point of a trade.
Forex market is very uncertain. It is very difficult to predict the market. So, it’s better to do apply all type of trading strategies when and what needed. Stick with one strategy is not helpful or wise. Or you can make your own strategy combined with other strategy. Also it is better to not only trade with some major currency pairs. Because there are huge range of currencies. You never know what will give you the best result.
I chased after HH and LL for a few days—created automated algorithms, backtested, etc.
Like you, I found a dearth of trades over a multi-year period. To get any meaningful dollars, I needed to add filters, which added to the complexity and lowered further the number of trades. I tried a few different currency pairs and time frames—nothing really leapt out at me as viable.
Then, switching from HH and LL as entries, I attempted a risk management algorithm to move my SL/TP based upon HH or LL. While this did help drawdown, it meant lowering the overall balance. Other risk management algorithms I tried were better.
So, I haven’t totally given up the idea. However, there are so many ideas to chase after and so many rabbit holes to navigate that I consider HH and LL to be back burner.
I think Higher high higher low & vice versa works. But execution wise is not going to be easy. Its harder than what you think.
On higher time frame, you are not going to get much trade. Seems pretty much like a waste of time to me. I use it on lower timeframe 1min or 5min. Depending on average daily range (ADR) for a particular pair. If ADR is low, i use 1min candlestick chart. If ADR is high, i use 5min candlestick chart.
There are 3 main session, namely, Asian, European and US. I think Major Currency pair or Major crosses with low spread are easier to tackle with. We need good volatility. Not extreme volatility, whereby market spike up and down erratically. Noting down high impact news for certain data and comparison with previous months exact same high impact news data. Will be very very useful to filter when Higher high Higher Low methodology will work or not.
It doesn’t always work. Extreme time and effort are needed to collect data for COMPARISON. Fundamental news data, effect on price action. Just like the one pip diddy does every weekend. Summary of the top mover for the week. If you do what pip diddy does and understand the impact of the high impact news. You will know what to expect the following week and at what time of the week its going to happen base on the economic calendar.
Backtest needs to be done. And it is really time consuming , boring and painful. We should really SALUTE pip diddy on the summary of top mover of the week. One fine day, i started copying what pip diddy does and finally get a better feel of the direction of each pair. And plan my swing high swing low methodology in line with specific duration of the week accordingly. Its not just a couple of technical indicator and aligning them up. It is a confluence of factors aligning that allow a particular methodology to work. Time filters are important here. Executing the right move at the appropriate timing will reap in the best rewards.
