Hurst Channel indicator

The Hurst Channel indicator upper, middle, and lower lines to tell about the trend’s direction. The indicator creates a channel by using these lines, hence the name.

This guide will talk about the Hurst channel indicator and how you can trade with it.

What is the Hurst Channel indicator?

The Hurst channel is a trend-following indicator, which moves along with the price to find the direction of the trend. JM Hurst developed the indicator and mentioned it in his book, “The Profit Magic of Stock Transaction Timing.”

The Hurst indicator looks similar to the Bollinger Bands, creating three bands and levels. The bands use ATR (Average True Range) calculations. The working principle of the Hurst channel is also similar to the Bollinger Bands.

We expect a bearish reversal whenever the price breaks above the upper band. On the other hand, if the price breaks below the lower band, we can anticipate a bullish reversal.

The middle band act at a neutral level, and whenever the price goes above or below it, we wait for the momentum to continue and break above/below the upper/lower band and then take the trade.

How to trade the Hurst Channel indicator?

Trading with the Hurst Channel indicator is quite simple. As mentioned earlier, we look for the price break above the upper band or below the lower band to enter our trades.

The bands also act as support and resistance levels. The upper band signifies a resistance level, while the lower mentions the support level. It gives an extra confirmation knowing that the price will reverse.

Hurst Channel pointing to a bearish reversal
Hurst Channel pointing to a bearish reversal

It’s important to note that sometimes the reversal can take a while, and the price may continue breaking above/below the bands. So, we must wait for the price to climb above or below the bands.

In the chart above, when the price breaks above the Hurst channel indicator, it presents a bearish reversal, and we see a downtrend afterwards.

Although you can apply the Hurst Channel indicator on all timeframes, it’s best to apply it on longer timeframes to reduce the market noise.

Buy Signal

  • The price must break below the Hurst channel indicator.
  • You should wait for the price action to go above the lower band and enter the trade.
  • You could set take-profit at the previous high from the entry point or exit the trade when the price exceeds the upper band.
  • You could place a stop-loss at the recent swing low.
Hurst channel buy signal
Hurst channel buy signal

Sell Signal

  • The price must break above the Hurst channel indicator.
  • You should wait for the price action below the upper band and then enter the trade.
  • You could set take-profit at the previous low from the entry point or exit the trade when the price goes above the lower band.
  • You could place a stop-loss at the recent swing high.
Hurst Channel sell signal
Hurst Channel sell signal

Conclusion

The Hurst channel plots three bands on the chart and works similar to Bollinger Bands. We have a reversal whenever the price breaks above or below the upper. Some traders might even use it to trade breakouts. Either way, I would want to confirm any buy and sell signal with additional market analysis using other technical indicators and candlestick patterns before taking any position.