Half of Something, Better Than All of Nothing
Hello, and welcome back to this week’s indicator. We’re going to take a look at something called the Half Trend indicator. Odd name, since how can you have half a trend? Definitely not part of the MT4 boxed set, we aim to bring you the weird, odd, different and even boring to help you become not only a better trader, but hopefully a profitable one. Let’s dig into this oddly named indicator and see what we can see, shall we?
Much Mystery, So Secret
As with some indicators, finding out the originator of the concept and subsequent coding can be a mystery. Sometimes, indicators just “evolve” from other ideas and the origin becomes lost in the shuffle. That’s okay. We do our best to find out where it came from and if the trail ends, then it ends. Again, that’s okay too.
Something Old, Something New, Something Borrowed, Something Blue, a Sixpence in Your Shoe
With respect to the Half Trend, we discovered that it was coded in 2014 by someone who either works for or owns a company called AlexSoftware; however, what’s interesting is that this indicator is actually based on another called Ozymandias (which may be the name of the coder) that has a similar look.
What’s The Dealio?
The Half Trend indicator uses a combination of moving averages and a filter to determine the trend strength. As you’ll see in the default image below, the signal line is a series of segments connected together that have different slopes. The steeper the slope, the stronger the trend. Flat portions indicate a lack of significant trend.
Computational Conundrum
While we couldn’t find the exact formula to create the signal line, we did peek into the code. There are various moving averages, ATR, a smattering of price point references, and a few other sprinkles of various items which comprise the indicator’s “guts”. You can always peek at the code using the MT4 MetaEditor, if you’re so inclined. We just like the pretty colors…
Confirmation Indicator
Used as a color change, this confirmation indicator lives right on your price, making it easy to spot the signals. It can be used as your primary confirmation signal or as a secondary filter in your algorithm. It might even make a good exit indicator as well, because color changes are simple to decipher.
Gimme Fuel, Gimme Fire
In the screenshot below, we’ve thickened the signal line to make it easier to see. And, we’ve changed the candle colors to white to remove price action bias, allowing us to focus strictly on the indicator.
Slippery Slope
A little earlier, we mentioned that the strength of the trend is noted in the degree of slope of the line. Cool feature, but we don’t need to concern ourselves with it. Some use it to try and predict reversals. But, you know our stance on reversal trading. It’s not a thing. You’ll either use a color change to exit or some other indicator in your algorithm to tell you when to get out. Don’t worry about the slope.
Settings
This indicator has a few of variables in the settings window, and we’ll use only the first one for our testing purposes. We’ll talk briefly about the others later. Below is the settings screen.
Amplitude: The degree that the line takes the internal variables into consideration. The higher the number, the fewer trades. The default value is 2.
Advantages
* Color change indicators are one of the easiest types to use.
* Only one setting to adjust.
* May be used as an exit indicator depending on your algorithm.
How we use it
Long signal – When the signal line turns blue (or a blue arrow pops up), entry is made on the open of the next period.
Short signal – When the signal line turns red (or a red arrow pops up), an entry is made on the open of the next period.
Let’s take a look at a marked up default chart to see where the entries would be.
Other Settings
There are a few settings which do not directly affect the indicator’s signals. These revolve around the use of arrows to direct you to signals and alert functions. Indicators which have alert functions provide you with the ability to text, email, or “pop-up” on your screen with a notification and even sounds, if you desire. We’ll address some of these in the MT4 playlist on the Stonehill Forex YouTube channel. If you turn the arrows to “true”, it looks like this.
Ausfahrt
German for exit, can this indicator be used as an exit indicator? We think it can. Ultimately, it’s up to you and the results of your testing. If it doesn’t meet with your expectations, no problem…you’ve got a lot of other options.
Testing…Testing…Testing…
Remember, comprehensive analysis is strongly suggested, and we advocate backwards and forward testing indicators or systems prior to trading actual funds. We propose conducting your tests on the following pairs.
EUR/USD
AUD/NZD
EUR/GBP
AUD/CAD
CHF/JPY
CAD/SGD
If it doesn’t work on these 6 pairs, chances are it won’t work on other pairs. This is not an absolute, but we’ve found this rule is reliable in most cases.
The markets we test our indicators are the:
EUR/USD (Euro/US Dollar)
BTC/USD (Bitcoin/US Dollar)
XAU/USD (Gold/US Dollar)
SPX500 (S&P500 Index)
Timeframes and Results
In our initial test, we’ll run the Half Trend indicator on the EUR/USD, BTC/USD, XAU/USD, and the SPX500 using the default settings across the daily and 4-hour timeframes on the MT4 strategy tester. We use the fast method of testing the indicator to get a general idea; however, you may also run the tick-by-tick data set for a more precise result (which takes considerably more time).
As No Nonsense Traders – and therefore Swing Traders, we will not examine shorter time frames in these studies. We will also run an additional test, using different values for the settings, to analyze which one may work better and examine the following results:
Total trades
Win/Loss ratio
ROI (return on investment)
There are other metrics included in the strategy tester report, which can be compared, but these three metrics provide the necessary gauge to make quick decisions as to the usefulness of a particular indicator and its settings.
Next, for comparison, we’ll explore the following;
Daily – 1 year
4-hour – 3 months
The reason exceptionally long (or short) testing periods are not included is due to changing market conditions, which might return irrelevant information. A balance of statistically significant data is necessary for accurate results.
And the Outcome…
Below are the spreadsheets illustrating the results from our tests.
The green highlighted rows represent “basic tweaks” on the settings which returned better results. Are these the best? Not necessarily. Given that variables including testing date range and broker data are different from person to person, you may find better settings.
Indicator Gone Wild
Notice that the results from our testing are all over the place. This is a great example that different markets and varying market conditions can greatly affect how an indicator will react with price. It comes down to the math. This is why we strongly advocate finding indicators that use different math, especially with C1 and C2. You want indicators with varied mathematical processes to provide reliable signals, so the odds of a successful trade will be in your favor.
Trust In Yourself
Remember, the overall NNFX philosophy of taking profit, risk, and drawdown is that YOU are creating a system which YOU will be trading. Don’t let anybody else take that away from you. Part of the learning process is digging in and doing the work yourself. To learn more about these topics, check out the Advanced Course!
That being said, the results we post in these blogs should never be considered specific trading advice.
***Note: Remember, never use just this one indicator as your decision of whether to open or close a trade. It should be part of a system.
Money Management
If you are curious as to what money management is used on our tests; we have a certain way of determining wins and losses, which can be found in the Advanced Course. Our goal here is to determine how well the indicator reacts to price with respect to producing a long or short signal. Your system, with its risk profile, will dictate individual returns.
Resources
As we did with past indicator studies, we’ve made the Half Trend indicator is available for download on our site from the indicator library. We will keep adding better indicators with each study for your use, at no charge. When you’re ready to get it, click HERE.
More to Come
There’s a lot more to come. We are excited to provide more trading tips in the near future. Sign up on our contacts page or subscribe to our YouTube channel. Receive early notifications as we continue to publish helpful, relevant, and informative Forex related material to support your quest to become a better trader.
And, now you are aware of another indicator that many traders don’t know or use.
Our only goal is to make you a better trader.
BTW – Any information communicated by Stonehill Forex Limited is solely for educational purposes. The information contained within the courses and on the website neither constitutes investment advice nor a general recommendation on investments. It is not intended to be and should not be interpreted as investment advice or a general recommendation on investment. Any person who places trades, orders or makes other types of trades and investments etc. is responsible for their own investment decisions and does so at their own risk. It is recommended that any person taking investment decisions consults with an independent financial advisor. Stonehill Forex Limited training courses and blogs are for educational purposes only, not a financial advisory service, and does not give financial advice or make general recommendations on investment.