1# High/Low Momentum Trading System

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Time Frame: 4H and Daily

 

One of the most popular momentum oscillators is constructed by subtracting a moving average from a closing price. When the close is above the moving average and accelerating upward from it, momentum is bullish and increasing; when the close is below the moving average and accelerating downward from it, momentum is bearish and getting even more bearish.

We wanted to design a momentum-based system but with a twist: we’ll use highs, lows, and a moving average rather than closes and a moving average.

We’ll construct two momentum oscillators. One will represent the high minus the moving average; the other will represent the low minus the moving average. Our system will also employ a longer-term moving average of closes to identify the trend.

When the trend is up, we’ll use the oscillator of lows to set up an opportunity to buy. When the trend is down we’ll use the oscillator of highs to signal a selling opportunity.

For both long and short positions, we’ll set a money management stop and enable a trailing stop.

Our signal to exit a long position will be when the oscillator of highs crosses below zero; we’ll exit our short position when the oscillator of lows crosses above zero.


Figure shows the High Low Oscillator system applied to a daily chart of GBP/USD. Also applied are two indicators, High Oscillator and Low Oscillator.

 

Setup

c) Calculate a 50-bar EMA (exponential moving average) of closes and 100 Ema bar

d) Calculate the high oscillator and the low oscillator.

Long Entry Position

a) Check for the 50-bar EMA to be greater than 100 EMA.

b) Check for the low oscillator to be below zero but rising. In other words, the low oscillator should be a negative value but less negative than one bar ago.

c) Buy on the next open.

 


Short Entry Position

a) Check for the 50-bar EMA to be less than 100 Ema Bar.

b) Check for the high oscillator to be above the zero line but declining. In other words, the high oscillator should be a positive value, but less than it was one bar ago.

c) Sell short on the next open.

Exit Order

a) Once we enter a position, we’ll set a money management stop, a breakeven stop, and a

trailing stop.

b) Also, we’ll exit our long position on the next open when the high sscillator crosses below

zero; we’ll exit our short position when the low oscillator crosses above zero.

Take Profit: 60 pips EUR/USD, 70 pips GBP/USD 4H Time Frame, for Daily time frame 200pips EUR/USD , 250 pips GBP/USD (recommended).

 

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Comments: 2
  • #1

    iso (Sunday, 09 February 2014 16:05)

    Template

  • #2

    farhad (Friday, 23 October 2015 16:18)

    tunks
    the strategy is very good