Gann Hilo activator and Stochastic Trading System For MT4
Please note: This strategy was publicly published in the trading community and is free to use. We do NOT make an attempt to decide if this strategy is profitable or not, because we know that the major factors regarding trading results are the skills/experience of the trader who executes the strategy. Therefore, we are mainly explaining the components and rules of the strategy. If applicable, we are highlighting advantages, disadvantages and possible improvements of the strategy.
The Gann Hilo activator and Stochastic Trading System For MT4 is a trading method that incorporates three technical tools to enter and exit trades. It works a double Stochastic technique with an additional trade exit and filter in the Gann Hilo activator.
To understand this system and trade it well, a background on the Gann Hilo activator and some familiarity with the double Stochastic strategy is necessary. And that is what this article provides. It also offers this system's rules and demonstrates how it works by explaining its actual setups.
Stochastic Oscillator
The Stochastic is a useful indicator for recognizing the market's extreme conditions. It uses a percentage comparison of the current price to the highs and lows of a particular trading range over a specified period.
It oscillates between 0 to 100, and the critical levels to keep an eye on are 80 and 20, which denote the overbought and oversold conditions. A currency pair that has an 80 reading is deemed to be overbought by the market and could head lower. Conversely, a 20 reading is considered to be oversold, which is an alert that the price could shoot higher.
Double Stochastic Strategy
As its name suggests, the double Stochastic strategy comprises two Stochastic indicators: one fast and one slow. The Fast Stochastic has a lower lookback period while the Slow Stochastic has a higher one. Typically, the Fast Stochastic has a 5,4 setting while the Slow Stochastic has 14,3.
Utilizing Divergence
And one of the common ways to use double Stochastics is to detect potential reversals through divergence. But first, what is divergence?
Divergence occurs when the price no longer moves in tandem with the indicator. If that happens, the price could change direction. The standard way to recognize divergence is to trace the price and indicator movement and compare both.
If, for example, the price heads higher and the indicator moves lower, that is an indication that the price could be on course to shift downward. This is aptly termed as a bearish divergence.
Fast and Slow Stochastic Divergence
On the other hand, the double Stochastic method uses both fast and slow Stochastic to identify divergence. This works with the two indicators moving oppositely, and at the same time, the price's move also deviates from that of the Slow Stochastic. But this requires a different setting altogether.
This particular strategy uses something similar but forgoes the condition where the price moves contrarily with the Slow Stochastic. What to look for is the two Stochastics to be in disharmony as that alone may presage a new direction for price. Here is what it looks like:
However, this may be prone to false signals since this occurrence can come frequently, especially with the two Stochastics' exact configuration in this system. For that reason, another indicator is needed for confirmation and as a filter -- the Gann Hilo Activator.
Gann Hilo Activator
Developed by commodities and futures trader Robert Krausz, the Gann Hilo Activator is an indicator for determining price direction and signaling entries. Its generated by averaging the highs and lows of the previous three periods.
Mostly, traders use this indicator for trading trends as the way it is graphed and utilized on the chart is comparable to a moving average. In fact, much like moving averages, it also hinges on the positioning of price relative to the indicator to determine the trend. Strictly speaking, when the price is trading above the Gann Hilo Activator, it suggests that the market is in an uptrend and vice versa.
The Gann Hilo activator and Stochastic Trading System For MT4
Now, the system combines the three indicators by allowing trend trading on the hourly timeframe. The Gann Hilo Activator filters out trades by first identifying what the overall trend is and then allowing only positions that are based on the trend to be taken.
The double Stochastic will trigger the trade when the readings on both indicators are at opposite extreme levels. In other words, when the Fast Stochastic has a below 20 reading while the Slow Stochastic is above 80, that signals a potential trade.
But again, it should be based on the identified trend of the Gann Hilo Activator.
Indicator Settings
- Gann Hilo Activator: The lookback period must be set at 20 instead of the standard 10.
- Fast Stochastic: The parameters should be %K=5, %D=2, and Slowing = 2.
- Slow Stochastic: The parameters should be %K=21. %D=11 and Slowing = 11.
Buy Trade - The Gann Hilo activator and Stochastic Trading System For MT4
Here is an example of a successful buy trade using this system:
The EURUSD was in a clear uptrend on the hourly as it cruised comfortably above the Gann Hilo Activator. Now, if the trader did not get in the trend early to capture the majority of the move, the double Stochastic strategy offers a good entry.
There are two arrows on the chart, and both mark two instances when the Fast Stochastic moved below and then above 20 while the Slow Stochastic still has an above 80 reading.
This offers an open door for buyers to rejoin the trend. If both trades were taken, the stop-loss is five pips below the Gann Hilo Activator, and the two dashed red horizontal lines denote these.
After this, the price just continued to move higher until its eventual cross below the Gann Hilo Activator, which is correspondingly the exit for this trade.
Sell Trade - The Gann Hilo activator and Stochastic Trading System For MT4
In this case, the currency pair, USDCAD, moved has a clear distance below the Gann Hilo Activator. The downward arrow indicates the signal to enter this trade as this is the instance where the Fast Stochastic is not in harmony with the Slow Stochastic.
And like the buy trade, the stop loss is also near the Gann Hilo Activator, but it is placed above it in this case. The exit for this trade is when the price crosses above the Gann Hilo Activator.
Please note: You should always try a new trading system on a demo account first. That way you can avoid unnecessary losses while learning the new rules.
Download the complete system description and the files here:
Partially Automated Trading Besides Your Day Job
Alerts In Real-Time When Divergences Occur
