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TREND HEDGE SYSTEM
1. The first goal is to determine the MAJOR TREND and enter a position in its direction the moment ALL conditions are met. To explain the system, lets assume the major trend is BUY
2. The next goal is to scale in more entries if price moves against the initial position by a specified number of pips, say 30pips. The lot size of new positions are the same as the initial position.
3. If price keeps moving against the major trend and the conditions for a MINOR TREND is met, a HEDGE position double the total number of major trend trend positions is initiated. For example if we already had a total of 0.5 lots size buying with the major trend, a sell position with 1.0 lot size will be initiated in the direction of the minor trend.
4. If price moves say an additional 30pips (as we have already chosen above)from the entry of the hedge position, the sell position, and the exit condition for the minor trend/hedge has not been met, a new position of 0.5 lots size is initiated(total lots size of major trend). We’ll therefore have a total of 1.5 lots size sell positions and 0.5lots buy position. More 0.5 lot size sell positions will be initiated as price keeps moving 30pips in the direction of the minor trend/ hedge provided exit conditions for the minor trend has not been met.
5. When ALL the conditions required to close the HEDGE POSITIONS is achieved, all positions are closed(major and minor trends)
6. If after closing all trades and the 4hr swing low on the wave from where we determined the major trend has not been violated, the major trend is still ACTIVE.
7. A buy position will be initiated when RE-ENTRY MAJOR TREND CONDITION is achieved.
8. A new hedge position will be initiated if the need arises and the cycle continues.
9. If after closing all trades and the 4hr swing low on the wave where we determined the major trend has been violated, it means the major trend ceases to be a major trend. It will now be called the MINOR TREND.
10. Following the above scenario of this example, RE-ENTRY MAJOR TREND CONDITIONS when achieved will cause a SELL position to be taken.
11. A hedge position(buy) will be initiated if the need arises and the cycle continues.
MAJOR TREND
Bullish Entry Conditions
RSI on H4 must be above 50
MACD histogram must be above its signal line on H1
Candle must have closed above downtrend line on H1
Exit Condition
Close when Stochastic and its signal line intercept above the 80 level ( or when their values are the same)
Bearish Entry conditions
RSI on H4 must be below 50
MACD histogram must be below its signal line on H1
Candle must have closed below uptrend line on H1
Exit Condition
Close when Stochastic and its signal line intersect below the 20 level ( or when their values are the same)
MINOR TREND
Bullish Entry Conditions
MACD histogram must be above its signal line on H1
Candle must have closed above downtrend line on H1
Exit Condition
Close when RSI on H4 falls below 50
Bearish Entry Conditions
MACD histogram must be below its signal line on H1
Candle must have closed below uptrend line on H1
Exit Condition
Close when RSI on H4 moves above 50
HEDGE MAJOR BULLISH TREND WHEN
Macd histogram is below its signal line and histogram is below the zero line on H1
RSI is below 50 on H4
HEDGE MAJOR BEARISH TREND WHEN
Macd histogram is above its signal line and histogram is above the zero line on H1
RSI is above 50 on H4
HEDGE MINOR BEARISH TREND WHEN
Macd histogram is above its signal line on H1
RSI is above 50 on H4
Candle close above down trendline on H1
HEDGE MINOR BULLISH TREND WHEN
Macd histogram is below its signal line on H1
RSI is below 50 on H4
Candle close below uptrendline on H1
NOTE:
1. Stochastic intersection is NOT THE CROSSOVER. Once the two lines touch and they are both above or below the 80 or 20 line, action should be taken
2. There should be visual representation of the different trends when attached to a chart so that we can easily follow up .
E.g Major trend : Bullish, Minor trend :bearish.
3. The trendlines are key to the success of this system.