Strategy using the Heikin Ashi indicator It’s great at finding trends and even better at finding reversals. Im also going to be adding another indicator to this strategy to make it that much more effective. Let’s get straight to it for all the beginners out there or for the people who don’t know what the Heikin Ashi indicator is. Let me give you a quick overview. So what we’re looking at now looks as if it’s just a normal chart. Well, actually, we’re looking at the
Heikin Ashi indicator at work Heikin Ashi actually means average bar in Japanese, so thats exactly what it’s doing: finding the average in the candlesticks. So this is the real-time chart, and this is the Heikin Ashi chart, so just make sure in the back of your head you know the Heikin Ashi is not the real price; it’s the average price. Instead of just looking at the Heikin Ashi candles, we were going to be looking at both the real-time and the Heikin Ashi at the same time so we could read and understand the chart.
This is just going to trading view, going to the indicators tab, and typing in Heikin Ashi. This will show both the realtime candles above and the Heikin Ashi candlesticks right below it. Now that we have the indicator added, let’s move on to the strategy. So when trading, it’s a lot harder to find trends than you might think. Not all trends are going to look this simple and just have all green candlesticks going up most of the time; they’re going to look like this is a strong trend going up but has multiple pullbacks with red.
candlesticks, which also might give you false signals on when to sell. That’s where the Heikin Ashi comes in. Instead of looking at this trend with a bunch of false signals that may get you to panic, we’re going to be looking at the Heikin Ashi. In most cases, it’ll have all the same color candlesticks and a strong trend. This way, it’s easier to identify the trend in real time. That’s exactly what the Heikin Ashi is for; it helps eliminate unwanted noise and shows a clearer version of the price movement.
Let’s move on to how to identify the trend. There are three simple rules you must follow to identify an uptrend. The Heikin Ashi candlesticks must be green; they must have large bodies, and they have no lower wicks. In this example, this would be a strong, long trend. All the candles are green; they have large bodies, and they don’t have lower Wicks; it’s the complete opposite of a downtrend. All the candlesticks must be red, have large bodies, and have no upper Wicks, so we all know charts gain and lose momentum all
After a strong upward trend, most of the time the chart will lose momentum and do a reversal in the opposite direction. Luckily, the hocky gashi is great at finding when that moment is about to happen. You can identify when a reversal is about to happen by this. a doge candle A dogee candle is a candlestick with a wand on both sides, has a small body, and can be either color depending on if you want to go long or short, so we are going to take advantage of what we just learned: the only rule you have to follow is you only.
Enter after you see a dogee candle and you wait for two candles in the opposite direction with opposite features. Let me show you an example so you know what I mean. So here you can see the price is making a downtrend, then we see the chart make a dogee candle in the opposite color, which indicates that theres a very good chance the price will make a reversal, then we wait for two green candles with only Wicks on the top to appear to confirm the reversal. If the candle has a wick on the top and bottom, we do not count that candle once.
The second candle with a wick only on the top appears, and we enter the trade, so this right here will be our entry signal. Let me show you an example of a short. The market is in an uptrend. We wait to see a dogee candle appear in the opposite color. We then wait for two large red candles to appear with only wicks on the bottom. Once we see the two candlesticks, we enter the trade. So that’s the Heikin Ashi indicator, which explains simply in a nutshell. Now I’m going to show you how to add another indicator to this strategy to make it that much more effective and, more importantly, more profitable, the indicator we are going to be adding to the strategy is the stats indicator.
Im not going to be going too in depth with this indicator because one, it’s very simple to use, and two, simply put, the stochastics indicator is a lot like RSI, as in if the lines are crossing above the top line, the market is being overbought; if the lines are crossing below the bottom line, the market is being oversold. So as an example here, the
Lines are crossing below the bottom line, indicating the market is oversold and its likely to reverse up upwards just like most indicators. Though this indicator by itself isn’t very good, combined with other indicators, it’s extremely powerful. To add this indicator, go to the indicators tab, type in stochastics, and click this one right here. Now let me show you how to combine these two indicators to make a very powerful strategy. First things first, if we want to go long, we want to find a point in the chart where the stochastics
indicator is crossing below the bottom line, and there is weak downward momentum. We do not want to enter a trade if the Scholastics lines are crossing below the bottom line and there is strong downward momentum because odds are the price will keep on falling. Here’s a perfect example. The Scholastic lines are crossing below the bottom line. Theres a downtrend, but a very weak downtrend. We then wait for a dogee candle to appear. Once it does wait for two large body candlesticks with only Wicks at the top, then we enter the
trade Here’s one more example. Scholastic lines are crossing below the bottom line. Theres a weak downtrend. Wait for the dogee candle. Wait for two large green candles with only Wicks on top. Enter the trade profit. I just showed you a profitable trading strategy using the Heikin Ashi and Scholastics indicators. All I ask in return is if you take seconds out of your day.
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