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Heiken Ashi CHEAT Strategies For Scalping & Day Trading (Forex, Stocks & Crypto) - YouTube
Channel: The Secret Mindset
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Heikin-ashi is a visual representation which
clearly shows trends and reversals.
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More importantly, it is a quantifiable technique
that is easy to implement and use.
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While traditional price candles appeal to
the more artistic and subjective judgement,
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Heikin-Ashi is a far more evident way to display
trends and reversals.
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Japanese candlestick patterns have very flexible
rules and interpretations "in the context."
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everyone translates them, more or less, in
a subjective manner.
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My personal interpretations may be different
from yours.
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These facts lead to the reality that candlestick
patterns are subjective, artistic, and challenging,
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so traders need a more objective, quantifiable
tool.
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And that tool is the Heikin Ashi.
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The very simple quantification makes the Heikin
Ashi technique attractive to those who tend
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to take a more analytical, more precise approach.
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Any heikin-ashi chart filters out price noise;
as a result, trends, consolidations, and reversals
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are more visible and clearer to the naked
eye.
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Sentiment, trend, and momentum are three elements
every trader should take into account-and
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all are addressed by heikin-ashi.
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A big advantage of the Japanese candles is
that they show participants' sentiment.
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Candle color and body length are reliable
measures for determining the degree of bullishness
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or bearishness.
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Long-body candles with no or small shadows
appear as a result of strong buying or selling.
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Excessive shadows or wicks underscore buyers'
and sellers' mood swings.
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A doji shows indecision or waiting for the
next action.
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The closing price relative to the open is
a clear indication about the bullish or bearish
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clouds hanging above the trading period.
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Heikin-ashi candles make it easier to identify
and follow trends.
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Green bodies with no lower shadows show an
uptrend.
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On the other hand, red bodies with no upper
shadows represent the price being in a short
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or longer downtrend.
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A doji-like modified candle with shadows emerging
after an uptrend or downtrend suggests a reversal.
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Finally, price consolidations are translated
as sequences of two or more heikin-ashi doji-like
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candles.
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With heikin-ashi candles, the sentiment is
measured by the color and size of the candle
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bodies together with the position of the shadows.
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Big green and red bodies are features of solid
underlying trends.
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Smaller bodies warn about trend exhaustion.
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A doji-like candle that follows a sequence
of green or red modified candles raises caution
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about either a reversal or the beginning of
a consolidation.
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While Japanese candlestick theory requires
many definitions and flexible interpretation
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rules for most common and exotic patterns,
the heikin-ashi technique works with only
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the five simple rules.
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1.
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A sequence of green bodies identifies an uptrend.
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A sequence of red bodies identifies a downtrend.
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2.
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The uptrend gets stronger with longer green
bodies and no lower shadows.
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The downtrend gets stronger with longer red
bodies and no upper shadows.
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3.
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The trend gets weaker with smaller bodies
and, possibly, with the emergence of both
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lower and upper shadows.
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4.
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A consolidation is revealed when a series
of smaller bodies with both upper and lower
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shadows emerge.
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5.
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A trend reversal is likely with the emergence
of a small body with long upper and lower
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shadows (doji-like candle) or a sudden color
change.
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Multiple time frame analysis in trading requires
an increased attention because of the better
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odds in catching trends and remaining in them
longer.
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Obviously if an uptrend is just starting in
daily (tfi), weekly (tf2), and monthly (tf3)
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time frames, the winning odds for a long entry
now are far bigger than when the entry is
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initiated in a daily time frame with weekly
and monthly charts casting bearish signals.
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The ideal scenario is to have trend alignment
in all three time horizons and to initiate
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the trade as early as possible in the trend.
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As a compromise, two consecutive time frames
may replace the ideal scenario.
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So, one option is to work only with two consecutive
time frames instead of three and to apply
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a simple strategy:
• buy when the current modified candle color
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changes from red to green in the two consecutive
time frames.
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• sell when the current modified candle
color changes from green to red in the two
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consecutive time frames.
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Another great strategy involves the RSI indicator.
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There are three horizontal lines plotted on
RSI indicator window: 30, 50, and 70.
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RSI 50 level can be used as a strong tool
to confirm the different kinds of trade setups
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using Heikin Ashi.
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I mainly prefer to use the relative strength
index (RSI) indicator for centerline crossovers.
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A movement from below the centerline (50)
to above indicates a rising trend.
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A rising centerline crossover occurs when
the RSI value crosses above the 50 line on
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the scale, moving towards the 70 line.
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This indicates the market trend is increasing
in strength, and is seen as a bullish signal
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until the RSI approaches the 70 line.
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A movement from above the centerline (50)
to below indicates a falling trend.
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A falling centerline crossover occurs when
the RSI value crosses below the 50 line on
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the scale, moving towards the 30 line.
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This indicates the market trend is weakening
in strength, and is seen as a bearish signal
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until the RSI approaches the 30 line.
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A simple strategy would be to
• buy when the current modified candle color
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changes from red to green and the RSI is above
50
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• sell when the current modified candle
color changes from green to red and the RSI
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in below 50.
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This way you have additional confirmation
that you are in a healthy trend, determined
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by both Heikin Ashi and RSI centerline.
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For an uptrend, you want to see the Heikin
Ashi trend built primarily by bullish candles
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and absent of lower candlewicks, with the
RSI above 50.
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When the price is shooting up, the price action
creates very little to no lower shadows.
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The bearish scenario has the same functions
as the bullish one but in the opposite direction.
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This means that it is built mainly by bearish
Heikin Ashi candles.
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You want to see a strong bearish trend on
the Heikin Ashi graph that has very little
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to no upper candle shadows, in addition to
the RSI below 50 level.
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Simple, and powerful.
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Here are some examples of uptrends and downtrends,
using this approach.
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The second strategy involves the Ichimoku
indicator.
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The Ichimoku cloud consists of several components
which give it a unique capacity to detect
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trends, to determine whether we are in a trend,
its direction and when the trend reverses.
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One of the components is the Kumo cloud which
is one of the most unique aspects of the Ichimoku.
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The Kumo is typically looked at in terms of
support and resistance; if it is thick, then
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the support/resistance is strong (depending
on the position of price in relation to the
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cloud).
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By contrast, if it is thin, then the s/r levels
are considered weak.
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Generally, if the price is above the Kumo,
then there is an uptrend in place and/or more
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buying opportunities.
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If the price is below the Kumo, then it is
under resistance and it is better to be looking
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for shorts instead of longs.
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The longer price action stays above or below
the Kumo, the stronger the trend and the more
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support/resistance the Kumo offers.
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A simple strategy would be to
• buy when the current modified candle color
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changes from red to green, Kumo cloud is green
and price is above the cloud
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• sell when the current modified candle
color changes from green to red, Kumo cloud
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is red and price is below the cloud
For an uptrend, you want to see the Heikin
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Ashi trend built primarily by bullish candles
and absent of lower candlewicks, and the candles
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above the Kumo cloud.
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A strong bearish trend consists of Heikin
Ashi that has very little to no upper candle
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shadows, in addition to the price below Kumo
cloud.
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Again, simple, and effective.
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Here are other examples of trends using Heikin
Ashi and Ichimoku cloud.
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Until next time.
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