Heiken Ashi Trend Continuation Forex Strategy







The Heiken Ashi is a type of candlestick based chart. Just like the regular candlesticks, it too shows candles with wicks and bodies. But their similarities stop there.
Unlike the regular candlestick chart, the Heiken Ashi chart doesn’t show the direction of the candle, as well as the open, high, low, and close price. This is because the Heiken Ashi chart is based on a mathematical formula intended to give emphasis on the direction of the trend, rather than the candle itself. The color of the candles are based on the direction of the trend. Some, Heiken Ashi charts could show the high and low of the candle, while other variations, don’t.
Below is an example of a regular Heiken Ashi chart.





As you would notice, compared to a regular candlestick chart, trends on the Heiken Ashi chart are easier to identify due to the color of the candles.

The Heiken Ashi Smoothed Chart

Another variation of the Heiken Ashi chart is the Heiken Ashi Smoothed chart. Its mathematical formula differs from the regular Heiken Ashi chart, making the trends smoother. However, its setback is that it doesn’t show the actual highs and lows of the candlesticks.
Here is an example of the Heiken Ashi Smoothed chart.
As you would notice, trends are even more clearly defined. However, it is impossible to identify price action because there are no highs and lows shown on the chart. Its strength however is in showing the direction of the trend. Reversals tend to be more reliable with the Heiken Ashi Smoothed chart compared to the regular Heiken Ashi chart.
With this strategy, we will be maximizing the strength of the Heiken Ashi Smoothed chart, which is defining the direction of the short-term trend.

100 Exponential Moving Average (EMA) Filter

Since the strength of the Heiken Ashi Smoothed chart is on defining the short-term trend, we will need a moving average indicator to identify the long-term trend. For this we will be using the 100 Exponential Moving Average (EMA).

The Chart Layout

For our template, we will be layering the Heiken Ashi Smoothed chart and the regular candlestick chart. In a way, the Heiken Ashi Smoothed chart acts as a short-term trend indicator.
The chart should look something like what is shown below.


The Buy Setup – Entry, Stop Loss & Exit

Buy Entry Rules:
  • Price should be above the 100 EMA
  • Price is on an uptrend
  • Coming from a red Heiken Ashi Smoothed candle due to a retracement, enter on the first blue Heiken Ashi Smoothed candle, which signifies that the trend has resumed
Stop Loss: The stop loss should be placed a few pips below the swing low formed on the retracement.
Trailing Stop Loss: As soon as price is at 1:1 risk reward ratio, the stop loss should be trailed a few pips below the Heiken Ashi Smoothed candles until the trade is stopped out in profit.

The Sell Setup – Entry, Stop Loss & Exit

Sell Entry Rules:
  • Price should be below the 100 EMA
  • Price is on a downtrend
  • Coming from a blue Heiken Ashi Smoothed candle due to a retracement, enter on the first red Heiken Ashi Smoothed candle, which signifies that the trend has resumed
Stop Loss: The stop loss should be placed a few pips above the swing high formed on the retracement.
Trailing Stop Loss: As soon as price is at 1:1 risk reward ratio, the stop loss should be trailed a few pips above the Heiken Ashi Smoothed candles until the trade is stopped out in profit.

Conclusion

This strategy’s strength is in the fact that it is a trend continuation strategy. Not only that it is a trend continuation strategy, both the long-term and the short-term trends are in confluence. Having the 100 EMA and the Heiken Ashi Smoothed in confluence increases the reliability of the strategy.
Another strength that this strategy has is its tendency to catch the whole short-term move because of the trailing stop. By doing this, the risk reward ratio improves, which also increases the trading edge.
However, it should be noted that the stop loss should not be trailed immediately until the profit is at 1:1. This is because since the stop loss is being trailed near the Heiken Ashi Smoothed, there is a tendency that the stop loss could be prematurely hit.
Overall, this strategy is one of those that has a clear trading edge due to the high probability of success per trade and the high risk reward ratio.

How to install Heiken Ashi Trend Continuation Forex Strategy?


  • Download Heiken Ashi Trend Continuation Forex Strategy.zip
  • Copy mq4 and ex4 files to your Metatrader Directory / experts / indicators /
  • Copy tpl file (Template) to your Metatrader Directory / templates /
  • Start or restart your Metatrader Client
  • Select Chart and Timeframe where you want to test your forex system
  • Right click on your trading chart and hover on “Template”
  • Move right to select Heiken Ashi Trend Continuation Forex Strategy
  • You will see Heiken Ashi Trend Continuation Forex Strategy is available on your Chart

Click here below to download:









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