Heiken-Ashi - The Money Machine

Hello, my dear friend! You have already noticed that we have a new thing for you. It will help you to create your own “money machine”, of course, we are talking about the Heiken Ashi indicator.

Let's see how to do this. First, open the settings window, and go to the “indicators” tab, where we find the Heiken Ashi indicator and click on it, as shown in Picture 1

Picture 1. Selecting the Heiken Ashi indicator in the platform settings window at the “indicators” tab.

After we turned it on, it would be good to figure out what to do next. The indicator itself is very similar to a regular candlestick chart. However, if you look closely you can find differences. The indicator itself is a transformation of current price values, aimed to make clear visualization of current trends of the price on the market. The Heiken Ashi chart is shown in Picture 2.

Picture 2. Trends in the price chart and trends in the Heiken Ashi chart.

As we see in Picture 2, the original price chart is more dynamic, price movements form highly ambiguous signals. Candlestick patterns are replaced more abruptly, which makes the beginning of the trend less pronounced. Unlike the original price chart, the Heiken Ashi chart is less susceptible to change. The trends are more pronounced and the less active dynamics allow the use of candlestick analysis to determine more likely price movements in the future.

Consider a simple, but a very effective strategy for working with the Heiken Ashi indicator. It is “Doji”, the candlestick structure.

The Doji strategy.

The meaning of Doji is that this indicator shows the ambiguity of the views of traders and thoughts about the future prospects of the price. The strategy is based on the candlestick structure and allows you to determine the trend reversal in order to take a more advantageous position at the beginning of the trend.

That means:

• If the trend has been increasing for a long time, and suddenly a candlestick like an umbrella “Doji” appears, then we can say that the market is no longer sure about the further price increase and it is worth playing short (bet lower).
• If the trend was downward and suddenly there is a candle that looks like an umbrella, then the market is no longer sure about the future trend, and it is worth playing a raise (bet higher).

In Picture 3 we can see that the candlestick structures appear on the indicator more pronounced and give a fairly accurate idea of ​​the nearest prospects for the price.

Picture 3. The Doji candlestick structure on the EUR/USD instrument.

As it can be seen in Picture 3, price candles do not give clear signals, when the Heiken Ashi indicator already shows that there is a pronounced ambiguity in price movements. There is likely a tendency to break, which means you can enter the trend at the very beginning without losing time.

You can also see that this indicator allows you to better and more clearly define candlestick structures, but the possibilities of this indicator do not end there, and in the next article we will look at how to build strategies with other indicators of technical analysis.

In conclusion, I would like to say that this indicator represents a completely different view on trading, which can be supplemented with various indicators, so we will look at the strategy with the indicator in the next article. To be continued...