Heiken Ashi Strategy – The Art of Japanese Samurai

Believe it or not, successful traders have the mindset of a Samurai, a legendary warrior of Japan. Our Heiken Ashi strategy  comes from Samurai culture as it follows the same principles that guided Japanese Samurai.

Our team at  Trading Strategies  G uides  believe that the code of honor Samurai, known as Bushido, meaning warrior, has superior principles that are extrapolated and applied to trading in any market. . Like a warrior, you will need to be disciplined and attentive to the conditions in front of you.

 

 

One of the unwritten rules of the Samurai code of conduct explicitly states that a Samurai is never afraid to act. A Samurai who lives a full and wonderful life. Our Heiken Ashi PDF trading system will foster the confidence you need to successfully trade the markets and overcome your fear of trading.

The Heiken-Ashi technique is simply another form of chart viewing that traders can use to spot trading opportunities. This new way of viewing charts can be applied to any timeframe.

Regardless of your trading style (day trading, swing trading, trend trading), you can implement this trading method to make better decisions . We also recommend learning how to determine the right swing to increase your profits.

First, let’s understand what the Heiken Ashi charting technique is. Then we will outline the rules of Heiken Ashi PDF trading system .

Another benefit is that we will highlight some real trade examples to better understand the best Heiken Ashi PDF strategy.

What is the Heiken Ashi Technique?

The three most widely used price settings are the bar chart, the  candlestick chart , and the line chart. And then there are other less used charting techniques, such as the Heiken Ashi. The Heiken Ashi chart gives an insight into the market. Use it when executing transactions that require correct entries and exits.

The Heiken Ashi is a charting technique that can be used to read price action and forecast future prices. This is similar to traditional candlestick charts. Unlike candlestick charts, Heiken Ashi charts are trying to filter out some of the market noise in an attempt to better capture market trends.

Simply put, Heiken Ashi is another way to display prices on our charts.

Here is a typical EUR/USD candlestick chart:

 

 

In Japanese, Heiken Ashi means Average Bar and it represents the average price or speed of the price.

The Heiken Ashi Candlestick Chart helps you spot trading phases and different ones to avoid.

Here is the same EUR/USD chart, but once the Heiken – Ashi chart is applied:

 

 

As we can see, there is a notable difference between the two chart types. That’s because the Heiken Ashi candle uses some complex math formula to determine the OHLC price.

The good news is that you don’t need to be a math expert to trade the best Heiken Ashi PDF strategy. All you need to do is understand the principles.

There are two main trade signals that we can identify through the Heiken Ashi candlestick:

  1. Bullish candles have no wicks or very small wicks. They indicate a strong uptrend and excellent buying opportunity.
  2. Small candles are characterized by a small body, large upper and lower wicks. They signal a potential reversal.

 

 

Now, here is the best way to conquer the market with  Heiken Ashi PDF trading system:

Best Heiken Ashi PDF Strategy

The best Heiken Ashi PDF strategies can only help you as long as you strictly apply the risk management rules . Now you know what Heiken Ashi candles are and how they differ from regular price candles. Let’s see how they can be more profitable than traditional price candles.

Heikin-Ashi candles use three data sets based on opening and closing.

  1. Price data from current open high low close.
  2. Current Heikin-Ashi values.
  3. The previous Heikin-Ashi values.

Now, before we go any further, we always recommend getting a piece of paper and a pen. Note the rules of this entry method.

Heiken Ashi . Technical Formula

If you hope to use the Heiken Ashi technique, you will probably want to use trading software that can generate the charts for you. Because of this, memorizing the Heiken Ashi chart formula may not really be necessary. However, knowing the formula can help you understand why this technique is useful.

Heiken Ashi uses the COHL formula, which stands for Close, Open, High, Low. These are the four components that affect the shape, size, and orientation of the bars. The recipes for each of these ingredients are listed below:

  • Close (indicates average price) = (Close + Open + High + Low) / 4
  • Open (indicates the average of the previous bar) = (Previous Open + Previous Close) / 2
  • High (highest value) = highest value of recent high, open and close
  • Low (lowest value) = lowest value of recent low, open and close

Once each of these variables is identified, you will be able to create a Heiken Ashi chart. Sometimes some of these values will be equal, which will affect the appearance of the chart in general. Adjusting the timeframe will also have a big impact on the shape of the chart. Many day traders prefer to use the five minute Heiken Ashi trading strategy. But using a 15 minute, hourly or even daily timeframe is also possible.

For this article, we will look at the buying aspect.

Step #1: Identify a strong move to the downside.

What we are going to look at now are some of the ways that we can combine these Heiken Ashi candles with our traditional technical analysis and start looking for some concrete trading ideas.

One of the simple ways we can use the Heiken Ashi candlestick is to trade the reversal when the candle changes color.

First, we will be looking for a strong downtrend or move to the downside.

 

Note * Heiken Ashi charts tend to provide more and smoother bullish and bearish candlestick sequences. This is because of the calculation used to average the range of the bar.

In the EUR/USD chart above, we have a double bottom,  this is a classic technical setup.

Two lows have formed almost at the same level. This is a traditional bullish reversal signal.

The Heiken Ashi strategy needs to follow one more condition before pulling the trigger.

See below:

Step #2: Wait for the Heiken Ashi bar to change color from decreasing (red) to increasing (green)

The first sign that the price is about to move higher is when we see a green Heiken Ashi candle.

For the Heiken Ashi bars to change color, there must be a drastic change in the order line. This usually translates into a much more reliable signal than we get when a regular price candle changes color on a normal price chart. Once the color changes, it may be time to make a trade.

The way we use this feature is simply doing traditional technical analysis and locating potential reversal zones with the Heiken Ashi chart.

 

We use price action reading skills as a filter to identify a potential trade. We then use the Heiken Ashi chart as confirmation to go ahead and execute the trade.

 

 

Step #3: The first bullish Heiken Ashi candle should have a larger than average wick

The long upper wick (upper shadow) can provide incredible trading signals. Especially when using the Heiken Ashi price chart.

You can also wait until you see a bullish Heiken Ashi candle without a lower wick. However, this method will cost you some profit left on the table.

 

 

The Heiken Ashi trading strategy satisfies all trading conditions. This means we can move forward and outline the trigger for our entry strategy.

See below:

Step #4: Buy at the market at the opening of the next Heiken Ashi candle

Our entry method is very simple.

This is a bullish reversal setup, so we are looking for buying opportunities when everything is in the right place.

We can now predict that a reversal is in place. We can go ahead and buy EUR/USD on the opening of the next Heiken Ashi candle.

 

 

This brings us to the next important thing that we need to set up for the best Heiken Ashi PDF strategy. Where do we put our guard stop?

See below:

Step #5: Hide your protective stop loss below the first bullish candle.

One of the really great things about Heiken Ashi candles, and what makes them great to trade, is how we can use them to set protective stop losses.

As the trend of the visible candles continues, we can go ahead and get really tight with our stops. We just need to put our stop loss below the low signal candle.

 

Last but not least, we also need to determine where to take the profits.

See below:

Step #6: Take profit after we close below the previous bullish candle.

A good Heiken Ashi trade setup will tend to run much longer than a regular price action setup. When we were trading with Heiken Ashi candles, we really wanted to exploit this. It is important to keep our trades open longer than usual.

Because we are using such a tight stop loss, we will only need a small price movement to make a good profit on this trade.

 

 

Note** above is an example of a BUY transaction using our Heiken Ashi PDF trading system. Use the same rules for SELL trades – but in reverse. In the image below you can see an example of an actual SALE transaction.

 

 

Conclusion Heiken Ashi Trading System PDF

Unlike the traditional candlestick reading where we look to trade reversals, the Heiken Ashi strategy can help you catch a falling knife. The other major advantage of using Heiken Ashi charts is that they improve your risk-to-reward ratio. This gives us a much tighter risk tolerance. We are also trained in  Japanese Candles and How to Use them.

The Heiken Ashi technique is one of the best reversal trading strategies. It gives us a smart way to manage our transactions. If you are confused by the noise generated by the classic candlestick chart, then you should switch to the Heiken Ashi forex strategy.