Heikin Ashi Trading System

Posted by Mangi Madang on December 24th, 2013

Ok, on a more serious notethis  Heikin Ashi Forex Trading System  is a trading system that allows you to stay in with the trend.

How?

I will explain shortly

Have you ever closed a trade thinking that the market is going to move in the other direction, only to find out later that it was just a trick just to make you panic and  you bail out quickly.

And guess what happens next?

The market continues in the original trend  or direction for another 150 pips!

You are now left scratching your head saying what the heck did I get outI should have stayed in that freaking trade!

This is so frustrating and  it happens to all traders.

So how do you solve this or have something tell you not to get out but stay in that trade?

Well?

Heikin Ashi Candlestick to the rescue!

WHAT ARE HEIKEN ASHI CANDLESTICKS?

The Heiken Ashi candlestick chart  looks like the real candlestick chart but theres a difference:

1. in a candlestick chart. each candlestick has four different prices which are: open, high, low & close. Each candlestick that is formed after has not relationship with the one the formed previously.
2. But with heikin ashi candlestick, each candlestick is calculated using some information from the previous candlestick:

If you want to  know more here is a brief detail of how the heikin ashi candlesticks calculated and plotted:

• Open price=average of the open and close of the previous candlestick
• High price=is chosen from the one of the high, open and close price of which has the highest value.
• Low price=is chosen from the one of the high, open and close price which has the lowest value
• Close price=is the average of the open, close, high and low prices.

Which means each candlestick that is formed on the heikin ashi chart is related to the previous one before it-therefore it causes the heikin ashi to delay-just like a moving average indicator.

TRADING USE OF HEIKIN ASHI

Heikin Ashi candlestick charts are used in the same manner as a normal candlesticks.

However there is an additional feature of heikin ashi that makes them different from standard candlestick charts and it is this:

• the colour of the heikin ashi candlestick is supposed to indicate the overall trend direction of the market
• which means it ignores the intermediate trend direction which is happening. In other words, it avoids the noise.

In summary: heikin ashi candlestick chart patterns allow you to stay with the overall trend by allowing your to avoid the noise or the minor fluctuations of price that is prevalent in a standard candlestick chart! 

Thats all there is for you to know about Heikin Ashi Candlestick Charts

 THE HEIKIN ASHI FOREX TRADING SYSTEM

Timeframes:  30m and upwards

Forex Indicators: 9&18 Exponential moving averages (or you can use this combination of emas:  7ema & 14ema. 10 ema & 20ema or 10ema & 25ema

Buy Trading Rules:

1. When 9ema crosses 18ema to the upside wait for the price to rally away from the ema lines.
2. After a while, you will see bearish heikin ashi candlestick form and they will come down to touch the 9ema and 18ema lines.
3. The buy signal entry candlestick is the first bullish heikin ashi candlestick that forms after those bearish candlesticks in step2.
4. you can buy immediately at market order.
5. place your stop loss below the low of the entry signal candlestick.

Sell Trading Rules

Its just the exact opposite for buying:

1. when 9ema crosses 18ema to the downside, wait for price to fall down and completely away from the ema lines.
2. after a while you will see bullish heikin ashi candlesticks form and will try to go back up to touch the ema lines. Once this happens, you know a sell trading signal may be just around the corner.
3. The buy sell signal is given by the first bearish heikin ashi candlestick that forms after that those bullish candlesticks in step 2.
4. sell at market order
5. place your stop loss above the high of the entry signal candlesticks.