Hodrick-Prescott Channel is a price action channel-based trend-following forex trading indicator. Since the statical/horizontal support/resistances do not work all the time, this indicator has brought a customized dynamic price channel for determining a better accuracy in trade placements.
Hodrick-Prescott Channel also assists with defining the market trends that add an extra confluence to your trade decisions. However, it is a short-term trading indicator and works better when applied on shorter timeframe charts.
Hodrick-Prescott Channel Overview
Download the indicator and install it on your MT4 terminal. Once you’re done, your chart will transform like the following image:
Hodrick-Prescott Channel Explanation
Hodrick-Prescott Channel calculates las 21-day period of price data for determining its trendline called “21-HP Trend” that works mostly like a Moving Average.
Price moves above 21-HP signals for the bullish trend of the market. On the other hand, price dives below the 21-HP level represent the bearish market trend.
Its VHP Channels accumulates the changes in price actions and automatically plots the channels promoting the support and resistance levels of the market. Buying for the support and selling for the resistance within the trend direction is the key rule of its application.
Also Read: Exness Broker Review
Hodrick-Prescott: Buy Conditions
- Price moves above 21-HP Trend curve
- A bullish candle forms right above the lower VHP channel
- Buy triggers at the break of the respective bullish candle’s high
- Set stop loss below the low of the lower VHP channel
- Exit long/take profit whenever price hits the upper VHP channel and starts to move downwards
Hodrick-Prescott: Sell Conditions
- Price moves below 21-HP Trend curve
- A bearish candle forms right below the upper VHP channel
- Sell triggers at the break of the respective bearish candle’s low
- Set stop loss above the high of the upper VHP channel
- Exit short/take profit whenever price hits the lower VHP channel and starts to move upwards
