In trading you can literally double their accounts overnight or lose it all in a matter of hours if they employ the full margin at their disposal. Experienced traders limit their leverage and never assume such enormous risk. The “hunting” strategy is an exceedingly simple setup, requiring nothing more than a price chart and one indicator.
What tools you need for the “hunting”?
Here is the setup in a nutshell: you need a price chart and an Alligator indicator. As you know, in the nature alligators are vicious hunters praying on their food in the bushes. The Williams Alligator indicator is a technical analysis tool that uses smoothed moving averages. The indicator uses a smoothed average calculated with a simple moving average (SMA) to start. It uses three moving averages, set at five, eight, and 13 periods. The three moving averages comprise the Jaw, Teeth, and Lips of the Alligator. The indicator applies convergence-divergence relationships to build trading signals, with the Jaw making the slowest turns and the Lips making the fastest turns. The rule of thumb in trading is to hunt when the Alligator is hunting. There is one question: when to call or put? Let’s take a look at the screenshot below.
Well, it seems that all positions are good for a PUT contract because the indicator is directed downwards, and lines do not intersect. However, it is a mistake: it is a road to failure because the price moves against us.
When to buy a contract with “hunting” strategy?
To determine the signal to buy we need more indicators or so-called “assisting tools”:
- Use the Relative Strength Index (RSI) to 14th period and remove all levels except the 50th. The RSI describes a momentum indicator that measures the magnitude of recent price changes in order to evaluate overbought or oversold conditions in the price of a stock or other asset.
- Use a Stochastic Oscillator is a momentum indicator comparing a particular closing price of a security to a range of its prices over a certain period of time. The sensitivity of the oscillator to market movements is reducible by adjusting that time period or by taking a moving average of the result. It is used to generate overbought and oversold trading signals, utilizing a 0-100 bounded range of values. Use default settings suggested by the Quotex platform.
- Stochastic oscillator charting generally consists of two lines: one reflecting the actual value of the oscillator for each session, and one reflecting its three-day simple moving average.
More tips on trading with Hunting Strategy
The hunting trading strategy is designed for lower timeframes: from 5 to 15 minutes. We recommend setting a short expiration period: the formation time of 2-3 candles. The basic signal for executing the CALL contract is when the Alligator is hunting, and all lines are moving upwards. To confirm the trend, you should check if the RSI is above the 50-level and the fast Stochastic (blue line) crosses the slow one from bottom to top as is shown on the screenshot below.
A signal to sell appears when a sleeping period changes for a downward movement. According the hunting strategy a PUT contract is executed when the Alligator is hunting, and its lines are directed downward. To confirm the trend, you should check if the RSI is below the 50-level and the fast Stochastic (blue line) crosses the slow one from top to bottom as is shown on the screenshot below.
Hunting trading strategy uses three powerful tools: Alligator, RSI and Stochastic. Divergence between the stochastic oscillator and trending price action is also seen as an important reversal signal. For example, when a bearish trend reaches a new lower low, but the oscillator prints a higher low, it may be an indicator that bears are exhausting their momentum and a bullish reversal is brewing. The RSI and stochastic oscillator are both price momentum oscillators that are widely used in technical analysis. While often used in tandem, they each have different underlying theories and methods. The stochastic oscillator is predicated on the assumption that closing prices should close near the same direction as the current trend. In other words, the RSI was designed to measure the speed of price movements, while the stochastic oscillator formula works best in consistent trading ranges.
To start looking for trading signals, install all the three indicators of the strategy on the price chart of your financial instrument. You may either use the default settings or play with them and find those that suit your trading style.
The hunting trading strategy is a simplified version of a complex and many-sided strategy Alligator strategy by Bill Williams. To make the signals more reliable, try to combine the strategy with the classical tech analysis: support and resistance levels, price patterns.