Woody Half Trend Forex Trading Strategy

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Woody Half Trend Forex Trading Strategy 1

Trading the forex market could be fulfilling. However, many traders who are new to the field find it difficult to trade. This is because traders often lack the sense of identifying the direction in which the market is most likely to take. Although there are many different ways in order to identify market direction, one of the easiest ways to identify the market’s direction with a high degree of likelihood that you would pick the right direction is by trading with the trend. Trend following strategies are probably one of the easiest ways to trade because the trade setups made will be going with the trend and not against it.

The Woody Half Trend Forex Trading Strategy is a trend following strategy with a relatively high degree of success rates. This is due to the indicators which are used, which are high probability standalone indicators. These indicators, when used together, provide an even higher probability trade setup, which could yield high returns.

The Half Trend Indicator

The Half Trend indicator is a very popular custom trend following indicator. This is due to its high accuracy and its tendency to yield high return trade setups.

The Half Trend indicator is based on a modified moving average, which puts emphasis on the highs and lows. This allows the indicator to identify trend direction quite accurately.

This indicator prints a line over the price chart based on its modified moving average computation. The line then conveniently indicates trend direction by the color of its line and by the direction of the vertical lines attached to it. During a bullish market condition, the Half Trend indicator prints a royal blue line with vertical lines below it. However, on a bearish market condition, the line then changes to red and the vertical lines are then attached above the Half Trend line. The Half Trend indicator also conveniently places an arrow pointing the direction of the trend whenever it detects a change in trend direction.

Double CCI Woody Indicator

The Double CCI Woody indicator is a custom indicator based on the Commodity Channel Index (CCI). The standard CCI indicator makes use of a Simple Moving Average (SMI) and its mean deviation to identify the depth of price oscillations. It then plots a line around a midline at zero, which oscillates up and down. Price is usually considered overbought whenever the CCI goes above 200 and oversold whenever it goes below -200. As such, traders typically use this indicator as a mean reversal indicator, which indicates probable trend reversals.

The Double CCI Woody indicator however, prints two modified CCI lines. One is a longer period CCI line, with histograms painted on its body. Whenever the histograms are positive, the market is said to be bullish, while if the histograms are negative, then the market is considered bearish. The second line is then overlaid on the body of the slower CCI line, and has a much faster parameter used, indicating a shorter-trend. It also differs slightly with the standard CCI indicator since its extremes are set at +/- 250.

Trading Strategy Concept

Although the standard CCI is typically used as a mean reversal indicator, we will be using the Double CCI Woody indicator as a trend following indicator. It will be used as a trend direction filter, based on its slower line and histograms. This indicator is quite good to be used as a trend following indicator because, it changes color based on the strength of the trend. Whenever a strong bullish trend is identified, the indicator prints medium sea green histograms. Whenever it detects a strong bearish trend, it then prints a red histogram. However, whenever the market trend starts to reverse, it prints a dark khaki histogram, which is then followed by a gold histogram, which indicates an imminent reversal coming. The trend direction based on the slower Double CCI Woody indicator line will be our main filter. As such, we will be removing the faster CCI line typically overlaid on the slower line and histograms.

Then, we will be waiting for the entry trigger which is based on the Half Trend indicator. As soon as the Half Trend indicator changes color and prints an arrow on the direction of the trend indicated by the Double CCI Woody indicator, we will be taking the trade.

Indicators

  • HalfTrend-1.02
    • Amplitude: 8
  • DoublecciWoody
    • TrendCCI_Period: 28

Timeframe: preferably 1-hour, 4-hour and daily charts

Currency Pairs: major and minor pairs

Trading Session: Tokyo, London and New York sessions

Buy (Long) Trade Setup

Entry

  • The Double CCI Woody indicator should be printing positive histograms which are painted as medium sea green, indicating a strong bullish trend
  • Enter a buy order as soon as the Half Trend indicator changes to royal blue and prints an arrow pointing up

Stop Loss

  • Set the stop loss below the Half Trend indicator

Exit

  • Close the trade as soon as the Double CCI Woody indicator prints a gold histogram indicating a probable trend reversal

Woody Half Trend Forex Trading Strategy 1

Woody Half Trend Forex Trading Strategy 2

Sell (Short) Trade Setup

Entry

  • The Double CCI Woody indicator should be printing negative histograms which are painted as red, indicating a strong bearish trend
  • Enter a sell order as soon as the Half Trend indicator changes to red and prints an arrow pointing down

Stop Loss

  • Set the stop loss above the Half Trend indicator

Exit

  • Close the trade as soon as the Double CCI Woody indicator prints a gold histogram indicating a probable trend reversal

Woody Half Trend Forex Trading Strategy 3

Woody Half Trend Forex Trading Strategy 4

Conclusion

This strategy is a strategy that allows for trade setups that yield a relatively high return. Trade setups could typically run from 2:1 to 4:1 depending on the strength of the trend.

This strategy should be used on a market which typically trends strongly. Avoid trading this strategy on a market which has tendencies to be choppy at times.

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