Heiken Ashi Binary Options Strategy

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Heiken Ashi: one indicator strategy for binary options

Candlestick analysis, despite its long history, continues to be one of the most profitable methods of how to make money on binary options on any financial asset from currency pairs to stocks and futures. Like any technique, it has, in addition to advantages and disadvantages, which means opportunities for improvement. One of the most successful modifications is Heiken Ashi candles.

Strategy characteristics

Any in the range M1-M15. In our case, M1 is used, but with an increasing period of analysis, the accuracy of the signal an increasing.

Any currency pair. The main requirement is a fixed (2-3 points) spread and no hidden fees.

All Forex trading sessions.

Percentage premium option:

Not less than 70-75%.

How «new» candles work

The main problem with all market analysis options is filtering random and small price movements that make it difficult to trade on a trend. To remove market “noise”, smoothing or averaging of historical data is used, which gives a clearer and clearer picture. The Heiken Ashi algorithm works similarly – we can say that we are dealing with a «candle moving average”.

It is present in the basic set of all binary trading platforms . Despite the external similarity with “classic” candlesticks, there are significant differences in the charts. Let’s look at the same period in more detail:

As you can see, the price levels of candles are different, although their shape as a whole coincides. We will not describe the calculation algorithm in detail; it can be found on the Internet. For profitable trading, only one feature of the indicator is enough: If only one price is used to build an ordinary candlestick (Open / Close / High / Low), then Heiken Ashi uses them for additional calculations.

The result will be additional smoothing, which means that the delay increases. At the same time, this makes it possible to use binary option trading signals on assets with high volatility, such as the GBB/JPY or EUR/JPY cross pairs-with the help of “synthetic” Ashi candles, you can filter out most of the false breakouts and entry points.

Finishing the theory and moving on to real binary options signals .

We will use the simplest and most visual live trading signals – a change in the color of the chart when the trend is reversed. To open the option, you need to meet two conditions:

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  • There must be at least three candles of the same color and direction before entering the market;
  • If the candle bodies are rising, this indicates a trend development. Accordingly, when the trend ends, they decrease, and the shadows increase;

Another condition is patience. You can try to enter the first candle of a different color, but it is better to wait for the full binary signals . The expiration time of the options should be at least 5-7 minutes, even if a minute is selected as the working timeframe, as in our video.

Recommendations about use …

  • During the publication of important fundamental news and statistics, we do not open options 30 minutes before the news and 30 minutes after the publication; cautious traders can close current deals. To control the events, we use the economic calendar included in the all popularbinary trading site!
  • You can use Heiken Ashi on any currency pair, it’s better to stay on the main ones (euro, dollar, yen), not captivating with exotic ones (Mexican peso, Indian rupee and others). Although these pairs show strong trends where you can make money, you should not be fooled by the schedule and “long candles”. In reality, we have low liquidity and a strong dependence on fundamental factors. In such conditions, most strategies andtop binary options signalsdo not work!
  • Working out graphical patterns poses a problem for traders: open a trade on it, for example, at the next bar after the breakout of the resistance line of the “triangle”. Or wait until three Heiken Ashi candles are the same color?

In this case, it is better to enter the market by a pattern signal. Graphic analysis more comprehensively sees the market situation, more precisely responds to its change. You can lose a lot of profit by waiting for the candle to change color.

  • Experienced traders on higher timeframes can open trades using only the indicator to monitor the “market pulse”, but this approach is more suitable for the stock market, where the trends are calmer. But in a dynamic Forex market, there is always a risk of a rapid reversal of even a long-term trend, so take into account the data of other technical tools and live trading signals ;
  • The indicator shows the end of local correction or rollback well. The closer the resumption of the trend, the greater the shadow of the candles, even if the body remains at the same level. It is recommended to close the current profit/loss when changing the color of the chart;
  • It is necessary to take into account not only the volatility of the trading instrument as a whole but also the average values for Forex trading sessions. For example, pairs with the Euro are the most dynamic in the European session, which means that the chart is the most informative. On the Asian side, volumes fall sharply and auto binary signals stop working.

Let`s summarize. Heiken Ashi is one of the best trend indicators and the delay is not a significant drawback. Opening with a delay of 1-2 candles allows you to enter a really strong signal and close exactly at the end of the trend.

They do not react to random market fluctuations, they perfectly show medium-and long-term movements, but it is better to open positions only after additional confirmation of binary signals , not during the flat period.

Heiken Ashi Binary Options Strategy

The Heiken Ashi binary options strategy involves the use of the Heiken Ashi candlestick indicator, as well as, the MACD indicator.

In this case, we shall be deploying a custom-made MACD indicator, which has been color-coded to recognize trend changes much earlier than the conventional MACD indicator which comes with the forex charts.

Indicators required for this strategy

The indicators to be used for this strategy are:

  • The Heiken Ashi indicator: This is a custom-made indicator which plots Heiken-Ashi candlesticks on the asset charts.
  • The MACD color-coded histogram: This is another custom-made indicator which paints the MACD histogram component of this indicator blue or red according to trend bias.
  • 21-day EMA: Acting as support or resistance for the price action depending on where price action is going.
  • 7-day EMA: While this indicator is not a very integral part of this strategy, the 7-day EMA can be used as an additional indicator to the chart to detect trend when this is not ascertainable on the charts at first glance. (Learn more about Moving Averages and how to use them)

The Heiken Ashi indicator will plot candlesticks using the following data:

  • open and closing price data from the previous time period
  • open price, high price, low price and closing price data from the current time period

The Heiken Ashi candlesticks are therefore different from the conventional candlesticks and on a chart, these will be seen plotted as additional candles on top of the Japanese candles. For this demonstration, we have adjusted the colours of the Heiken Ashi candles to blue and red respectively; blue candles representing up candles and red candles representing down candles.

The strategy

The Heiken Ashi candlesticks indicate when the trader should trade Call or Put based on color changes. So when the Heiken Ashi candles turn red in colour, it is a signal to prepare for a PUT entry, and when they turn blue, it is a signal to prepare for a CALL entry. These colors can be customized by the trader for visual clarity.

The 21-day exponential moving average (EMA) is the resistance-support line for this trade, while the MACD histogram also determines the trade direction by means of a color change. Red is a signal to PUT, and blue is the signal to CALL. A typical trade performed with this strategy must therefore take all these parameters into consideration and put them together so that signals are clean, clear and unambiguous.

CALL TRADE

The Call trade setup occurs when the following conditions occur at the same time:

  • The Heiken Ashi indicator candles are blue.
  • The price bounces off the 21 EMA
  • The MACD histogram bars are blue in colour.

These conditions are displayed in the chart that we have shown below:

This is a one hour chart that displays the fact that there are several opportunities to trade this setup over a one-week period. We can see that on this chart, 4 areas to set a Call trade (marked 1, 2, 3 and 4) were seen over a 9-day period. When the market is trending, the opportunity to profit from this trade is enhanced.

As in similar trade setups we have described, it is necessary to determine the correct exit point for the trade so that the expiry time will leave the trade in the money. While left to the trader’s discretion, it is suggested that the trader can leave an expiry time of about 4 hours, or 4 candles in length for a trade taken from a one-hour chart.

PUT TRADE

The trader should short the currency pair when the three indicators show the following characteristics. Again, these should all be seen at the same time:

  • The Heiken Ashi indicator candle bars assumes a red colour.
  • The price action has come from above and broken the 21 EMA to the downside, or is coming from below in a pullback fashion and is rejected at the 21 EMA.
  • The MACD histogram bars are already red in colour.

The chart below shows the possible entry points for a long trade based on the conditions that we have stipulated above on a daily chart.

The snapshot displays the setup that occurs that makes a PUT trade possible. The lines indicate where price action marked by red Heiken Ashi lines bounce off the 21EMA line and provide the trade signals. Once again, it is pertinent to set the expiry time using the timeframe chart as the guide. This chart was pulled from a one hour chart, and therefore it would be ok to use at least 4 candles as the length of time which should be allowed to pass before the trade expires.

Tips for better trades

A closer examination of the charts will show that there are times when the Kumo will be horizontal in orientation, showing that the price action is going to be in consolidation or will be in a range-bound mode. This strategy works best when the Kumo is in a trend, showing that the asset will be in a trending mode. A trending market will not be in the best interest of the trader as the asst has to make a move in some direction to actually give the chosen trade a chance at success. So how can the trader confirm that the market will trend?

One way of performing a confirmation to see if the price action is actually going to trend is to introduce another indicator. One such indicator which is used to detect a trend is the 5-day exponential moving average (5 EMA). When the 5 EMA crosses over the 21 EMA in one direction, it is most likely that this will be the direction of the trend. Where the 5 EMA fails to produce a definitive cross with the 21 EMA, the market will in all probability end up being range-bound and the strategy will not deliver. So perhaps the trader will need to add the 5EMA to the chart to check for the trend before executing any kind of strategy.

One of the best indicators based on MAs is trend indicator for MetaTrader 4 that not only produces non-repainting crossover trading signals, but also filters them through ADX, which measures the strength of a trend.

Please remember to test all your strategies on a demo account first.

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