The Hurst Exponent Indicator monitors the price’s volume memory. It can identify trending and ranging markets and employs mean reversion.
It measures the volume possibility of price moving in a particular direction, using data from the river Nile studies. The indicator is named after one of the leading researchers, Harold Edwin Hurst, and is abbreviated as “H”.
The Hurst Exponent is not an oscillator that moves in the same direction as the trend. Rather, it measures the likelihood of the price moving in a certain direction.
The indicator is ideal for novice, intermediate, and experienced forex traders, and can be applied on all timeframes.
The indicator ranges from 0 to 1, with a value of 0.5 indicating a random walk, and values above or below 0.5 indicating trending or mean-reverting markets, respectively.
Values above 0.5 indicate persistence, meaning the current price is more likely to continue in the current direction. Conversely, values below 0.5 indicate anti-persistence, meaning the current price is more likely to reverse.
The chart typically displays the Hurst Exponent as a line graph, with the 0.5 level indicated by a dotted line.
Traders can look for crossovers of the Hurst Exponent with the 0.5 level to generate signals. The indicator can also be used to identify periods of ranging or trending markets, which can inform trading strategies.
- The value of Hurst must be between 0.5 and 1.
- Wait for the price to continue upwards and then enter the trade.
- Consider exiting the trade when the value of H reaches close to 1.
- Set a stop-loss near the recent low to manage risk.
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- The value of Hurst should be between 0.5 and 0.
- Wait for the price to continue downwards.
- Consider exiting the trade when the value of H reaches close to 0.5.
- Set a stop-loss near the recent high to limit potential losses.