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Yet another Heiken Ashi system

  • #1
  • First Post: Edited Jan 15, 2013 7:19pm Jan 9, 2013 3:37am | Edited Jan 15, 2013 7:19pm
Thread discontinued.

Update: I will be releasing a thread soon based on my new MTF analysis method without using Heiken Ashi. Thank you for reading and your continuous support.


Quoting Forex37
amikaking,

thanks for this system and thread, which you named " A tribute to lawgirl21". Lawgirl21 also left her threads, left the building BUT she left everything intact, not deleting a single post, indicator or template.

As a tribute to lawgirl21 it would be very kind of you to restore everything.

With great respect

Forex37
For your request, I will only post the rule of my previous MTF HA system. Make sure you are able to handle risk well because using this system can be very dangerous. You are warned.

My Trading System explained:

Heiken Ashi SW: The famous HA candle is bundled into separated indicator a window which is used to confirm and to reinforce our entry on the lower timeframe (H4).

Heiken Ashi Smoothed: They smooth out price movement on the chart making trend readable easily.

200 EMA: Most commonly used to identify long term trend direction and trading bias.

Average True Range (ATR, period 14): A handy tool to help us setting our stop loss, trailing stop and take profit target based on current market volatility.

I always use multiple time frames (MTF) analysis to look for high probability trading opportunity on higher timeframes that produce high quality trading signals. If you are a long term trader like me, I suggest using the H4-D1-W1 combination because they produce the strongest signals when all the entry criteria are met. The other variation that I would go for is the H1-H4-D1 combination but it is really up to you depending on your trading style.

BUY rules:
1. Heiken Ashi SW is white in all 3 TFs.
2. Heiken Ashi Smoothed is blue in all 3 TFs.
3. Price is clearly above 200EMA in all 3 TFs.

SELL rules:
1. Heiken Ashi SW is red in all 3 TFs.
2. Heiken Ashi Smoothed is red in all 3 TFs.
3. Price is clearly below 200EMA in all 3 TFs.

Exit rules:
Right after you made an entry, use the current ATR value as your standard SL and as well as your trailing stop. Your take profit target is 2X of the current ATR value. This way we are having a positive 1:2 risk to reward ratios. You may also ride the trend or use any other exit strategies.

You can apply this system to any pairs you like to trade. Just like when we are using other trading systems as well, the thumb of rule is to STRICTLY FOLLOW THE ENTRY RULE that I have defined. We will not take any trades if one of the entry criteria is not met. Stay away from the market if there are no signals.



Attached File(s)
File Type: mq4 Heiken Ashi_SWAlert.mq4   5 KB | 4,015 downloads | Uploaded Jan 15, 2013 7:18pm
File Type: mq4 Heikin_Ashi_Smoothed.mq4   3 KB | 3,277 downloads | Uploaded Jan 15, 2013 7:18pm
File Type: tpl mtf ha.tpl   2 KB | 2,612 downloads | Uploaded Jan 15, 2013 7:18pm
  • #2
  • Jan 9, 2013 4:36am Jan 9, 2013 4:36am
Hi amikaking,

It's nice to read a new thread from a neighbouring countries. I am from Singapore. I will subscribe to your thread. When you mentioned that the trading strategy have earned you decent money consistently, I am wondering if you are refering to say min 10% profit consistently on a weekly/monthly basis. Even if you say you are able to profit 1% consistently on a monthly basis, to me this is considered really good as most of the traders are unable to get profit on a consistent basis. They may have make 600% on the 1st month and huge drawdowns on subsequent months but after averaging the past 6 months, they still make profits. To me this is not consistent.

Will you be able to share with us which currency pairs you are monitoring currently to get the readers on the same page as you? I am also a firm believer of MTF analysis and using Henken Ashi. Seems like we are having similar trading frequency. But based on what I have observed, most of the currency pairs exhibits inconsistent trends at different T/F. For example, it may trends up on weekly and 4H but trends down on daily.

How many pairs will you trade at any given time? I normally will not exceed 10% of my trading capital irrepective of how many pairs I trade per day. Each trade will not exceed 2% of my trading capital.
  • #3
  • Edited 10:09pm Jan 9, 2013 4:48am | Edited 10:09pm
Was immediately drawn to your thread title. What a great educator Lawgirl21 was. She was so patient with newbies and explained things in practical terms with real, live trade examples. She is sorely missed and I hope she is doing well in both life and trading.

Subscribed and watching with interest.
Audentes Fortuna Juvat
  • #4
  • Jan 9, 2013 4:57am Jan 9, 2013 4:57am
Very interesting. I'm in

How many time did u trade this system? Results?
  • #5
  • Edited 7:09am Jan 9, 2013 5:09am | Edited 7:09am
Quoting patguay
Hi amikaking,

It's nice to read a new thread from a neighbouring countries. I am from Singapore. I will subscribe to your thread. When you mentioned that the trading strategy have earned you decent money consistently, I am wondering if you are refering to say min 10% profit consistently on a weekly/monthly basis. Even if you say you are able to profit 1% consistently on a monthly basis, to me this is considered really good as most of the traders are unable to get profit on a consistent basis. They may have make 600% on the 1st month and huge drawdowns on subsequent months but after averaging the past 6 months, they still make profits. To me this is not consistent.

Will you be able to share with us which currency pairs you are monitoring currently to get the readers on the same page as you? I am also a firm believer of MTF analysis and using Henken Ashi. Seems like we are having similar trading frequency. But based on what I have observed, most of the currency pairs exhibits inconsistent trends at different T/F. For example, it may trends up on weekly and 4H but trends down on daily.

How many pairs will you trade at any given time? I normally will not exceed 10% of my trading capital irrepective of how many pairs I trade per day. Each trade will not exceed 2% of my trading capital.

Hi, thanks for your kind reply. It's nice to know you that you are from Singapore.

If you have read before Nial Fuller price action trading section, he suggested traders to risk only in the amount express in dollar which you are comfortable and OK to lose with, but not in % of your trading account.

For example, if I have a $1000 account and I decide to risk $200 (which I am comfortable to lose with, and this is already 1/5 or 20% of my trading account) so I will adjust my lot size to match the SL of that particular trade. What I mean that there is virtually no limit of how much you gonna risk per trade. You can think of risking $20, $50, $100, or even $500 if you are fully confident with that particular trade and become a risk taker. Even if you lose in the end, you will still be comfortable.

I demo traded this strategy with a $1000 account back in November by risking $100 and sometimes $200 per trade and it earns me 40% at the end of November and brought the account to 80% at the end of December (including winners and losers as well). But it is just demo. In real live trading you should be very confident that the trade will hit your TP or if you can move it to breakeven or close it out manually. You can trade as many as pairs you like if you get the exact signal from 3 TFs as long you are able to limit your risk exposure. I strongly suggest you to do demo with this strategy until you are fully confident with it. Recently I just started with a mini account of $100 and as you can see from my screenshot I am risking around $70 for these two trades. (actually it is pretty madness if you see how big my risk exposure is )

Sorry but to tell you, making money consistently doesn't mean every trade you will be winning because losers can happen sometimes and that's why a strict MM is very crucial. If I win 8 out 10 trades per month, I am still profitable even though I lost 2.

As for you info, I treat 4H as my entry chart, D1 as my daily viewing chart and W1 as my long term trend confirmation chart. H4 to D1 is a ratio of 1:6, and D1 to W1 is also a ratio about 1:6. When looking for BUY signal if you see on the 4H the HA is RED but on D1 and W1 is WHITE and other entry criteria are met, you only need to wait for the HA to turn WHITE on the 4H chart then you can trigger the trade. As long as all entry conditions are met on these 3 TFs, then you are safe.

This is the latest live trade I'm having, here the HA candle on the 4H became RED, so we do not open any trade on NZD/USD until HA becomes white.
Attached Image (click to enlarge)
Click to Enlarge Name: Sample.png Size: 99 KB


There are still many ways to improve the accuracy of this system by using currency strength comparison indicators like Recent Strength indicators and KG indicators (have been here around FF) to trade the strongest vs weakest currency. As seen from my screenshot, I'm trading NZD and AUD vs USD because NZD and AUD (both correlated) are currently the strongest currency and USD (USD index) is losing strength now. That is why I feel confident for these two trades I'm taking.
  • #6
  • Jan 9, 2013 5:10am Jan 9, 2013 5:10am
Hello

Nice system, can I use on this TF H30 min - H 1 hour - H 4 hour ?

Regards
Enter Signature
  • #7
  • Jan 9, 2013 5:18am Jan 9, 2013 5:18am
Amikaking
One aspect of trading pinbars that I have found useful over the years is to only trade them with trend.
The second is to simply apply Fib's to the pinbar. Wait for PA to retrace back into the pinbar 50%. This will increase your R/R. IF it does not hit the 50% retracement, I do not take it. I can't really comment on trading gold as I have never done it.

All in all, your trading philosphy sounds good and refreshing.
  • #8
  • Edited 6:14am Jan 9, 2013 5:24am | Edited 6:14am
Quoting lucariga
Very interesting. I'm in

How many time did u trade this system? Results?
I accidentally discovered this system back in November last year when I leave a demo account of $100 to grow itself in the GBP/JPY long trade by risking all the account and without SL and TP. In the end it grew into $250 without my intervention.

Please take note I'm trading this from a $100 LIVE mini account and increase it to $183 ($30 is the deposit bonus my broker offer).

In 4/1/2013 I have withdraw a total of $83 profits from it (because I only trade a $100 mini account as baseline, whenever profit I get I will withdraw it out immediately rather than leaving it in my account)

Attached Image (click to enlarge)
Click to Enlarge Name: DetailedStatement.gif Size: 13 KB
  • #9
  • Jan 9, 2013 5:26am Jan 9, 2013 5:26am
Quoting Danutz
Hello

Nice system, can I use on this TF H30 min - H 1 hour - H 4 hour ?

Regards
Yes you can as long they have a ratio of 1:4 or 1:6 each other respectively.

Quoting tibokano
Amikaking
One aspect of trading pinbars that I have found useful over the years is to only trade them with trend.
The second is to simply apply Fib's to the pinbar. Wait for PA to retrace back into the pinbar 50%. This will increase your R/R. IF it does not hit the 50% retracement, I do not take it. I can't really comment on trading gold as I have never done it.

All in all, your trading philosphy sounds good and refreshing.
Hi thanks for your comment and your opinion about trading pinbar.

I do trade pinbar all the time before I use this system, but I trade gold the most of my time so it has really a large volume per trade and retracement is one of the most annoying and dangerous factor when trading gold. I did draw Fibs from time to time and what I can really say, price can and do actually pierce the fibs level from 68.1 all the way to 100% and trigger your SL, resulting a huge pips loss. That is why I decide to trade a system which can be left to run itself without even watching it.
  • #10
  • Jan 9, 2013 5:55am Jan 9, 2013 5:55am
Quoting amikaking
I accidentally discovered this system back in November last year when I leave a demo account of $100 to grow itself in the GBP/JPY long trade by risking $80 and without SL and TP. In the end it grew into $250 without my intervention.

Please take note I'm trading this from a $100 LIVE mini account and increase it to $183 ($30 is the deposit bonus my broker offer).

In 4/1/2013 I have withdraw a total of $83 profits from it (because I only trade a $100 mini account as baseline, whenever profit I get I will withdraw it out immediately rather...
Which is your win/loss %?
  • #11
  • Edited 6:27am Jan 9, 2013 6:05am | Edited 6:27am
Quoting lucariga
Which is your win/loss %?
I started my account with $100. A high risky trade lost me $75 first but then I have recovered it to $100 then finally to $183.

The win rate is 70%. The system can fail when you are trading at the end of the trend (or when the market is ready to dips lower/rally higher) therefore I think some filter should be applied to overcome this weakness. But if the market is really trending like you see on the higher TF D1 and W1, I think you should hold the trade longer as long your SL is not hit.

As for money management, one should try demo it first because it really depends on how much you are risking on per trade. The higher you risk, the higher the return, but also higher the drawdown if you lose. I am a high risk trader so whenever I achieve my desired profit target (sometimes price almost hit TP target 20 pips away), I will close the trade and run.
  • #12
  • Jan 9, 2013 7:34am Jan 9, 2013 7:34am
Here is another live example of a potential setup in USD/JPY, but this time I'm using H1-H4-D1.

First we look at the major trend (200 EMA). Three TFs show that the pair is in a strong uptrend and now we have a H1 chart with all entry criteria met, but we still need to wait for confirmation on the H4 and D1. When these conditions are fulfilled, we will go long on this pair.

The advantage of using this system is that it gives you the exact market condition and trading bias across 3 correlated timeframes and is like telling us to be patient until the price has confirmed to go forward. Once price made its move forward, we will be given the entry signals to trade.

Good luck everyone~

Attached Image (click to enlarge)
Click to Enlarge Name: usdjpy.png Size: 91 KB
  • #13
  • Jan 9, 2013 8:05am Jan 9, 2013 8:05am
Hi amikaking,

Can I just check with you I have the same HA settings as you because they do not open with the template you provided even though the indicators are in my indicator folder.

HA smoothed

MaMetod 2
MaPeriod 6
MaMetod 2 3
MaPeriod 2 2
  • #14
  • Jan 9, 2013 8:18am Jan 9, 2013 8:18am
Quoting normtold
Hi amikaking,

Can I just check with you I have the same HA settings as you because they do not open with the template you provided even though the indicators are in my indicator folder.

HA smoothed

MaMetod 2
MaPeriod 6
MaMetod 2 3
MaPeriod 2 2
Hi thanks for your inform. The settings are correct but in the template I provided I forgot to put in the Heiken Ashi SW. I have updated the template now. Here you go:
Attached File(s)
File Type: tpl heiken ashi mtf system.tpl   2 KB | 1,471 downloads
  • #15
  • Jan 9, 2013 8:58am Jan 9, 2013 8:58am
Here is my AUD/USD trade going on. Already 22 pips up at time of writing now.

Trying to figure out possible TP method. One of them is to use Bollinger Bands (default setting period 20 deviation 2). Second option is to use W1 ATR value instead of D1's. Any suggestion?

Attached Image (click to enlarge)
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  • #16
  • Jan 9, 2013 9:30am Jan 9, 2013 9:30am
Hi Amikaking,

Thank you for sharing your system. I have one question, let say you use w1-d1-h4,
if d1 is the only that we wait for confirmation to change colour let say from white to red, if d1 just change to red, will you wait till the candle of D1 close or as soon the colour change, you enter the position straight away ?
  • #17
  • Jan 9, 2013 10:13am Jan 9, 2013 10:13am
Quoting sapiemas
Hi Amikaking,

Thank you for sharing your system. I have one question, let say you use w1-d1-h4,
if d1 is the only that we wait for confirmation to change colour let say from white to red, if d1 just change to red, will you wait till the candle of D1 close or as soon the colour change, you enter the position straight away ?
Just like when you are using any system, the best way is to enter upon the closed of the candle. This is considered safe once the candle has closed because HA would not repaint
  • #18
  • Jan 9, 2013 10:51am Jan 9, 2013 10:51am
Hi fellow malaysian. Good thread!
  • #19
  • Jan 9, 2013 11:12am Jan 9, 2013 11:12am
Quoting amikaking
Hi, thanks for your kind reply. It's nice to know you that you are from Singapore.

If you have read before Nial Fuller price action trading section, he suggested traders to risk only in the amount express in dollar which you are comfortable and OK to lose with, but not in % of your trading account.

For example, if I have a $1000 account and I decide to risk $200 (which I am comfortable to lose with, and this is already 1/5 or 20% of my trading account) so I will adjust my lot size to match the SL of that particular trade. What I mean...
Hi amikaking,

I can see that you are a meticulous person who bothers to re-read your reply and make the necessary amendment/edit your previous comment. I really appreciate your detailed explanations to my queries. It must have taken you a lot of time to provide all the necessary details.

Regarding money management, I have not heard of Nial Fuller before but I used to employ similar stop loss to what you are currently using. But one of the drawbacks is that this is not really so systematic in terms of managing your losses and appreciating your capitals since stop loss is based on how much you can afford to lose rather than based on say fixed amount of capital or based on risk % of capital. But to each his own, since you are using only $100 as capital, you can afford to burn your accounts 100 times if you have a total of $10k to trade. Moreover, you make an effort to withdraw the profit in excess of $100. This is a unconventional way of managing your losses and profits. I prefer to use position sizing based on certain percentage of capital. Anyway, we are just using different route to arrive at the same destination.

I think you have misunderstood my question. When I say making profit consistently, I am actually quoting your words from the 1st thread. Based on what I have gathered from all your replies, the system has a winning percentage of 70% and average win is 2, average loss is 1. The expectancy is (0.7x2)-(0.3x1) = 1.1 which is a good one. However, since you only start demo trading it last Nov, your sample size may be quite small. The winning percentage may not be 70% if you increase your sample size.

I also notice that you add to your position for your NZDUSD position but the stop loss to target profit ratio is not 1:2 but you adhere to the 1st position S/L and T/P which is 0.82944 and 0.85200. It seems that you are not sticking to the 1 : 2 risk rewards ratio but rather exercise discretion when you add on new posiiton. Correct me if I am wrong. Under what circumstances will you start adding position?

Is my understanding correct to say that once the PA reach 1 x ATR, you will adjust your stop loss to breakeven?

I enjoy reading your thread. Please keep up the good work.
  • #20
  • Edited 10:48pm Jan 9, 2013 5:21pm | Edited 10:48pm
Quoting patguay
Hi amikaking,

I can see that you are a meticulous person who bothers to re-read your reply and make the necessary amendment/edit your previous comment. I really appreciate your detailed explanations to my queries. It must have taken you a lot of time to provide all the necessary details.

Regarding money management, I have not heard of Nial Fuller before but I used to employ similar stop loss to what you are currently using. But one of the drawbacks is that this is not really so systematic in terms of managing your losses and appreciating your...
Yes, I get you. Regarding to money management, I assume every trader should have their own methods to handle very trade. One reason for me not to use % to measure my risk is that I can often left my trade for a very long period. My experience with this system told me, the longer you stay in the market and as long all Heiken Ashi and Heiken Ashi Smoothed across all 3 TFs (here I'm referring to H4-D1-W1) agree together would have allow you to catch huge market movement during a trending phase. This is what we call "let the market run and do the rest of its job for you" or you would just say "ride on the trend". I develop this long term system just like lawgirl21's approach but she uses only moving averages on a H1-H4 basis. She mentioned that these kind of setups even pick up consolidation areas and retraces itself before the trend resumes. So a fixed TP is just an option for those who do not want to glue to their charts everyday. If you are a risk taker, a SL or TP is no longer required if you have confidence to hold on the trade for a long period. I am also experimenting to take profit with Bollinger bands too.

In the screenshot below I employ lawgirl21's 5 Smoothed MA to my chart, you will notice that it is actually moves and behaves almost the same like the Heiken Ashi Smoothed. The only thing it can't do is to color itself to show us uptrend or downtrend.
Attached Image (click to enlarge)
Click to Enlarge Name: Untitled.jpg Size: 111 KB


I assume that most brokers offer trailing stops function in their MT4 platform so you can input 1XATR (daily) as your trailing stop and initial stop loss. Let's say my SL is 60 pips, I will input my trailing stop as 60 pips too so if price moves 60 pips in my favor, the SL will be automatically adjusted by your broker to breakeven. When it moves to 120 pips, your trailing stop will lock in another 60 pips profit. You can adjust your trailing stop value everyday if you see some changes in the ATR. As for the fixed TP, you will just multiply 2XATR or use 1XATR if you want to grab a quick profit.

So let's say what happen if Heiken Ashi and Heiken Ashi Smoothed changes color on a the entry chat (H4)? Ignore it. Unless there are changes on the viewing chart (D1) and sometimes a slight change in longer term chart (W1) as well, it means that the market is either undergoing pullback stage or a reversal is about to happen. Then it is when I should decide to quit the trade. I assume every trader should know how to interpret and analyze the market sentiment.

Regarding to the winning rate, I suggest everyone to do demo first because not every result would be the same like mine and in the Forex market past performance does not guarantee future returns. Everyone should always bear this in mind. You could also do a visual backtest using this system and see how good the system (Heiken Ashi) is on riding the trend. You can apply any indicators like moving averages like lawgirl21 did to increase trading probability too. The only important part of this system is the entry rule. The exit rule is all up to you.

I hope this would answer all your questions. Good luck, buddy.

**At the time of writing, my AUD/USD trade yesterday actually erases all my gains. On the H4 TF I saw red Heiken Ashi but on my viewing chart (D1) and W1 chart all Heiken Ashi is pointing long so the uptrend remains strong and intact. I will definitely hold on the trade until if I see changes to my D1 or W1 charts.**
Attached Image (click to enlarge)
Click to Enlarge Name: Untitled.png Size: 100 KB
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