The Heiken Ashi indicator is popular among traders for simplifying chart analysis and highlighting market trends. But what if I told you there’s something better? Yes, I’ve discovered an indicator that outperforms Heiken Ashi in almost every way.
After backtesting it extensively, I found this new tool to be twice as profitable as the traditional Heiken Ashi. In this guide, I’ll share:
- What this secret indicator is
- How to use it effectively
- A profitable strategy you can implement today
Let’s dive in!
The Problem with Regular Candlesticks
Here’s what a standard candlestick chart looks like:
You’ve got a mix of red and green candles, but it’s chaotic and hard to interpret. All the “noise” on the chart often leads to false signals, making it tough to determine the true market direction.
Enter: Heiken Ashi
The Heiken Ashi indicator addresses this problem by smoothing out the chart. It replaces regular candlesticks with modified ones, making trends much easier to identify. For example, in an uptrend, you’ll see a series of green candles, while a downtrend shows red candles.
Sounds great, right? Well, not so fast.
The biggest flaw of Heiken Ashi is that it doesn’t display the actual price. Instead, it offers a smoothed version, which lacks critical details like support, resistance levels, and candlestick patterns. These are essential for making informed trading decisions.
Introducing the Smoothed Heiken Ashi Overlay
This new indicator, created by jackvmk, takes the Heiken Ashi concept to the next level. Instead of replacing your candlesticks, it overlays the Heiken Ashi on top of them. This means you can see both price action and the smoothed trend data at the same time—the best of both worlds.
Why It’s Better:
- Reduced False Signals
Normal Heiken Ashi often generates misleading signals. For example, during an uptrend, it might display red candles that can fake you out. The Smoothed Heiken Ashi Overlay eliminates this problem by providing a more accurate depiction of trends. - Enhanced Trend Clarity
By combining price action with Heiken Ashi data, you can easily spot reversals, momentum shifts, and trend strength.
How to Add the Smoothed Heiken Ashi Overlay to Your Chart
Here’s how to set it up on TradingView:
- Open TradingView
If you don’t have an account, create one. (Check the link in the description for signup details.) - Add the Indicator
- Go to the Indicators tab.
- Search for “Smoothed Heiken Ashi” by jackvmk.
- Click to add it to your chart.
- Adjust the Settings
- For short-term traders: Set the parameters to 5 and 5 for better analysis of short-term price movements.
- For long-term traders: Use 20 and 20 for identifying broader trends.
- Default Settings (10 and 10) work well for most scenarios.
How to Read the Smoothed Heiken Ashi Overlay
- Green Candles: Indicate an uptrend.
- Red Candles: Indicate a downtrend.
But here’s the secret: You can also use candle size to gauge market strength.
Example:
- Growing Candle Size: Signals increasing momentum.
- Shrinking Candle Size: Indicates weakening momentum and a possible reversal.
For instance, in a downtrend, if the red candles start shrinking, it’s a clue that the market might be about to reverse.
A Profitable Strategy Using the Smoothed Heiken Ashi Overlay
Now that you understand how the indicator works, let’s use it to create a winning trading strategy.
Step 1: Identify a Strong Trend
- Look for a series of red candles (downtrend) or green candles (uptrend).
- Ensure the candles are increasing in size, which indicates strong momentum.
Step 2: Spot a Trend Reversal
- Watch for candles to shrink, signaling that momentum is fading.
- Look for a color change (e.g., red to green for a bullish reversal).
Step 3: Wait for a Pullback
- Once the color shifts, wait for the price to pull back to the Smoothed Heiken Ashi candles.
Step 4: Confirm the Entry
- Enter the trade only if the price respects the area and forms a confirming candle (e.g., a green candle in a bullish setup).
Step 5: Set Risk Parameters
- Stop Loss: Place it below the recent low (for a buy trade).
- Take Profit: Use a 1.5:1 risk-to-reward ratio.
Step 6: Lock in Profits
- When the price hits your take profit, sell 50% of your position.
- Move your stop loss to your entry price to protect your gains.
Step 7: Exit the Trade
- Exit the remaining position when the Smoothed Heiken Ashi changes color again.
Why This Strategy Works
This approach ensures you’re trading with the trend while minimizing the risk of false signals. By waiting for confirmation and using the Smoothed Heiken Ashi as a guide, you can increase your win rate significantly.
Final Thoughts
The Smoothed Heiken Ashi Overlay is a game-changer for traders looking to improve their accuracy and profitability. It eliminates the flaws of traditional Heiken Ashi while offering unparalleled clarity and precision.
Test it out and let me know your results! If you found this helpful, don’t forget to follow me on Instagram for more tips and strategies.
Next up, I’ll reveal how I made over $70,000 in 60 days using this exact strategy. Stay tuned!
