Higher Highs & Lower Lows by Vitali Apirine
Spotting emerging trends, defining correction periods, and anticipating reversals can benefit your trading in many ways. Here’s a look at a trading system that uses momentum indicators to define trend direction.
The higher high lower low stochastic (HHLLS) is a momentum indicator–based system that helps determine the direction of a trend. It is made up of two separate indicators: the higher high stochastic (HHS) and lower low stochastic (LLS). These two indicators can be used to spot emerging trends, define correction periods, and anticipate reversals. Signals can also be generated by looking for divergences and crossovers. Because the HHLLS is range-bound, it can also be used to identify overbought and oversold levels.
HHS is based on price highs, while LLS is based on price lows. These two indicators are plotted side by side so they can be easily compared. The default parameter setting is 20 and you’ll notice that the example shown in the sidebar “Calculating HHLLS” is based on 20 days. The MetaStock code for HHS and LLS can be found in the sidebar...