Traders have commonly heard the phrase “the trend is your friend.” Have you ever thought about how to find the trend with precision? Though several indicators and price action methods exist, traders often fail to succeed to identify the trend direction. Some may miss it completely, whereas others might only look at the short-term trend, without considering the bigger picture. That being said, the Half Trend indicator can help to clarify the trend direction of a currency pair for you. The tool is quite simple to read, with only one line showing the trend direction. However, I found it to be hit and miss, so would not use it without conducting further chart analysis before taking any position.
What is the Half Trend Indicator?
As the name suggests, the Half Trend indicator is a tool to reveal the current trend of an asset. The indicator also tells you when the trend reversal occurs. This is a non-repainting indicator and resembles the moving average. Take a look at the chart below to see it in action:
The indicator is very clean and easy to read on the charts. The blue color of the line suggests a bullish trend, while red shows a bearish trend. The best part is that you can easily combine it with any strategy or other tool for your trading strategies. I would not personally trade every time price crosses the Half Trend indicator but would instead use it as a filter to decide if I want to trade long or short. For entry and exit points, I would be looking at other technical indicators and price action analysis such as candlestick patterns.
Half Trend Indicator Strategy
The Half Trend indicator can be applied to the chart with default settings. You do not need to change anything but you can always experiment with the settings depending on your trading style. The indicator can be used on any timeframe. The lower charts timeframes will probably not be as good at filtering the trend compared to the higher chart timeframes. I would be looking to use the indicator on the 1-hour charts and above to try and filter some noise out of the markets. Let’s take a look at its input below:
The default amplitude is 2. If you increase the value, the indicator will turn conservative and reveal a late trend reversal. You can turn the ShowBars true if you want to see the trend as a bar. However, it doesn’t look as clean on the chart and might end up causing more confusion than necessary. A nice feature is to set an alert on a trend reversal. So, whenever a trend changes, you will get a popup message on your trading platform. This means you do not need to constantly gaze at charts all day long and can save you lots of time.
The Half Trend trading strategy is quite simple. You could buy when the trend changes from bearish to bullish. Similarly, you can sell when a trend alters from bullish to bearish. You may also add more positions when the trend grows stronger. However, as mentioned above, I would not be blindly taking positions when the indicator changes direction. This would lead to way too many false signals.
Buy Signal
Here’s the buy signal using the Half Trend indicator:
- You can choose a higher timeframe, like 4-hour or daily, for higher accuracy.
- You should wait until the red indicator line turns blue.
- You should wait until a bullish candle closes.
- You can place your stop-loss just below the immediate swing low.
- You can put take profit twice your stop-loss level or close the position manually when the trend turns back bearish.
Sell Signal
Here’s the sell signal using the Half Trend indicator:
- You can choose a higher timeframe, like 4-hour or daily, for higher accuracy.
- You should wait until the blue indicator line turns red.
- You should wait until a bearish candle closes.
- You can place your stop-loss just above the immediate swing high.
- You can put take profit twice your stop-loss level or manually close the position when the trend turns bullish.
Conclusion
The Half Trend indicator provides a simple way to grab the trend reversal and potentially get in on new trends from the start. You can use your creativity to apply the tool to trading depending on your preferred trading style. The tool’s simplicity makes it a good choice for new traders although it really only gives you an idea of what the trend might be. You will need to take the initiative when it comes to finding suitable entry and exit points. Like any other trading tool, the indicator may show false signals, especially during periods of market consolidation. Hence, you may want to try it on the demo to understand how it works before putting it on your live account.
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