Hodrick-Prescott Channel Indicator for MT4

Hodrick-Prescott Channel Indicator MT4

MT4 Channel TradingFree Download

The Hodrick-Prescott Channel Indicator for MT4 is a price channel based on the Hodrick-Prescott digital filter and it’s available for free download. Instead of having static support and resistance levels, it plots dynamic bands that adjust to the ongoing price action. As the result, a forex trader receives more accurate potential entry points.

Are you a fan of channel trading strategies? If so, let’s take a closer look at it and bring some practical trading examples.

Introducing the Hodrick-Prescott Channel Indicator

MT4 Indicator Overview

The download link of the Hodrick-Prescott Channel MT4 indicator is placed at the bottom of this post. Once you’re done, your trading chart should look similar to the example below.

Hodrick-Prescott Channel Indicator Explanation Chart

As you can see, it consists of two elements two bands that together create a channel called VHP and a 21-period moving average line called HP Trend. There is also a middle dashed line that separates bullish and bearish market conditions.

The Hodrick Prescott Channel is meant to catch price reversals. When it comes to understanding the HPC, it’s important to know that when the 21-HP Trend moves below the middle dashed line and the price rejects the lower channel band, it signals a bullish trend in the market. Conversely, if the price rejects the upper band when the HP Trend rises to the second half of the channel, it suggests a bearish market trend.

That forex indicator track changes in price action and automatically plot channels to identify support and resistance levels in the market. The key to using this tool effectively is to buy at support levels and sell at resistance levels, all while following the overall trend direction.

Settings

There are a few variables you can customize to fit your preferences or your trading strategy.

Hodrick-Prescott Channel Indicator Settings

How To Trade With The Hodrick-Prescott Channel Indicator?

Generally speaking, the signal trigger is based on channel band rejection and then a reversal. Let’s deep dive into how to exactly use that forex indicator in a few easy steps.

Hodrick-Prescott Channel: Buy Signal

21 HP Trend dips below the channel middle line
Price approaches lower band and rejects it
Channel should be leaned upwards
Open long trade when the above conditions are met
Set stop loss a few pips below the most recent market’s low point
First take profit it at the middle line and second take profit at the opposite band

Hodrick-Prescott Channel Indicator Buy Signal

Hodrick-Prescott Channel: Sell Signal

21 HP Trend rises above the channel middle line
Price approaches upper band and rejects it
Channel should be leaned downwards
Open short trade when the above conditions are met
Set stop loss a few pips above the most recent market’s high point
First take profit it at the middle line and second take profit at the opposite band

Hodrick-Prescott Channel Indicator Sell Signal

How to set up the Hodrick-Prescott Channel indicator in MetaTrader (MT4)?

Installation Guide

Download the Hodrick-Prescott Channel.rar archive at the bottom of this post, unpack it, then copy and paste the vhpchannel_03.ex4 or vhpchannel_03.mq4 indicator files into the MQL4 folder of the Metatrader 4 trading platform.

You can gain access to this folder by clicking the top menu options, which goes as follows:

File > Open Data Folder > MQL4 > Indicators (paste here).

Now go to the left side of your MT4 terminal. In the Navigator find the gauge name, right-click it and select Attach to the chart.

Conclusion

We find the Hodrick-Prescott Channel as a solid and worthy forex indicator. It’s important to be very familiar with candlestick patterns, especially rejection and reversal patterns. It can be a good idea to add some filters for trade entry confirmation. Don’t forget that it uses a dynamic formula, thus, during high-volatility market conditions, the channel may adjust its slope significantly.