Forex Trading with Hurst Center of Gravity BandsHurst COG (Center of Gravity) Bands are simply Polynomial regression bands which fit the NONLINEAR nature of the markets!
They are based on the cycle work of JM Hurst (the Father of Cyclic Analysis) and his theory was that all markets move in a cycle and this cycle will show up in highs and lows. Prices tend to regress toward the mean, which is represented with the white center-line. The Green/Red bands above and below the center-line represent the sigmas and there is only a 5% chance price will exceed them. So when price reaches these channels a reverse trade can be taken.
Our software has TWO versions of these bands. One is the curve fitted beautiful one that looks like it can never be wrong and the other shows where the ACTUAL bands were in the past to help you find the best settings for the currency and time frame being traded.
Curve Fitted Hurst/COG BandsThese statistically based price channels are used to spot overbought/oversold levels, momentum, and divergence.
The chart below is our 5R (5 Pips Per Bar Forex Range Chart of the GBP/USD). On it we show our Hurst COG Bands Historical which adjust to perfectly fit price movement.
The SLOPE of the bands Determines the Trend!
- Uptrend --> You want to BUY the lower bands.
- Downtrend --> You want to SELL the upper bands.
- Counter Trend --> Sell Upper Bands IF at Fibonacci Target or other major Resistance Level!
We suggest combining this indicator with Support & Resistance Levels, Fibonacci Retracement levels, and trendlines. When multiple different reversal areas ALIGN is often the best trades in our opinion.
Hurst / COG Bands ActualBecause the Curve Fitted bands adjust PAST BARS to perfectly fit the polynomial regression it is ESSENTIAL to see where they were in the past.
This is what our Hurst / COG Actual bands do. They show you EXACTLY where the RIGHT MOST VALUES were on every bar in the past.
You may PREFER the look of the Curve Fited Hurst Bands (We Do) but in order to discover the best settings for the currency and time frame you are trading you need to check the Actual box in our indicator. This lets you see the actual values in the past and as you can see it looks totally different but lets you see the REAL TRADES YOU WOULD HAVE TAKEN!
(Green arrows for where you should have bought, and Red arrows for exits or Counter Trend Trades if this fits your trading style.)
How to Setup Hurst Indicator
As you can see there are many options to help you OPTIMIZE this tool for YOUR STYLE of trading. You can change almost every aspect of this indicator!
Period: Number of bars back for Polynomial Regression
m: Number of coefficients of curve fit
K Std: Values from .618 to 1.618 Suggested
Width: Width of lines from center outward 0 removes line.
Actual: Check this box to see ACTUAL values for every bar.
Colors: Sets the color of Center, Square, and Outer Bands