Hodrick Prescott indicator is forex trading indicator. It is a moving average based trading indicator. The Hodrick Prescott indicator is actually a trading setup that is backed by two moving averages. The Hodrick Prescott indicator is useful for the experienced traders as well as for the beginner traders. The Hodrick Prescott indicator is a trend following trading indicators which generate buy and sell signals based on the moving averages. The trend of the market is major concern of these trading indicators. These indicators let us know the direction of the market and enter in the direction of the market.
When trading with such indicators one requires a lot of discipline and patience because one has to wait for the crossovers. When the Hodrick Prescott indicator is correctly installed in your trading platform, your chart should look like this:
- HPMA indicator
HPMA, here, refers to the Hodrick Prescott indicator. This indicator consists of two moving averages and the signals will be generated on the basis of the crossovers of these two moving averages. First of all you should filter out the markets which are trending and after that you should wait for the right time to execute your trade and exit your trades. There are certain rules for entering in the market and exiting from the market, we will write down rules below.
Buying Conditions Using Hodrick Prescott indicator.
- Market should be up trending.
- Grey color moving average should cross above the red moving average.
- Place your long position as soon as above conditions are met.
- Place your stop loss just below the recent swing low.
- Take your profit when the blue moving average crosses above the grey moving average.
Selling Conditions Using Hodrick Prescott indicator.
- Market should be down trending.
- Blue color moving average should cross above the grey moving average.
- Place your short position as soon as above conditions are met.
- Place your stop loss just above the recent swing high.
- Take your profit when the grey moving average crosses above the red moving average.
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