Heiken Ashi Naïve EA

Heiken Ashi

Heiken Ashi is an alternate technique of representing the standard holder charts for the aim of commerce. in contrast to with ancient Japanese candles, it's not possible to scan the particular worth levels (Open, High, Low and Close) on Heiken Ashi chart, however it's easier to identify trend developments and reversals. Rising Heiken Ashi candles area unit sometimes premeditated as white ones, and also the falling — as red ones. equally to the quality candles, Heiken Ashi show wicks. Neither direction of a candle, nor the length of its wicks purpose to actual worth levels, however rather ought to be thought of in relevance alternative Heiken Ashi candles within the shut proximity.

The switch of colours means that a modification of trend: red to white — a pessimistic trend reversal, white to red — a optimistic trend reversal. Increasing candle linear unit signals strengthening of trend. Decreasing — signals weakening. Lower wicks on white candles and higher wicks on red candles signal volatility and trend instability. Lack of such wicks indicates a precise and clear trend.

Calculation Rules

The following rules are used to calculate Heiken Ashi candle levels:

HA_Open = (previous HA_Open + previous HA_Close) / 2
HA_Low = minimum(Low, HA_Open, HA_Close)
HA_High = maximum(High, HA_Open, HA_Close)
HA_Close = (Open + High + Low + Close) / 4
Where:

HA_Open, HA_High, HA_Low and HA_Close — Heiken Ashi candle levels.
Open, High, Low and Close — normal candle levels.
The levels of the initial HA candle are equal to respective levels of the original candle.

Trading Strategy

Heiken Ashi Naïve expert advisor uses a rather simple, yet not very obvious method to trade with Heiken Ashi candles.

The following entry signals are used:

Sell if the latest completed HA candle is bullish, its body is longer than previous candle's body, previous candle is also bullish, and latest candle has no lower wick.
Buy if the latest completed HA candle is bearish, its body is longer than previous candle's body, previous candle is also bearish, and latest candle has no upper wick.
If there exists an open position in an opposite direction when a signal arrives, the position is closed. If the existing position is in the same direction as the signal, the latter is ignored.

The following exit signals are used to close trades before a new entry signal arrives:

Exit short position if the latest completed HA candle is bearish, previous candle is also bearish, and the latest candle has no upper wick.
Exit long position if the latest completed HA candle is bullish, previous candle is also bullish, and the latest candle has no lower wick.
As you can see, the expert advisor uses the inverted logic in its trading strategy. It goes long when the Heiken Ashi system points at a rather strong bearish trend, and it goes short when it is a bullish rally according to Heiken Ashi. The trick here is that it tries to catch reversals as early as possible.

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