Heiken Ashi: one indicator strategy for binary options

• VFX Blog
• Strategies

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

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 colour of the chart when the trend is reversed. To open the option, you need to meet two conditions:

• There must be at least three candles of the same colour 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 colour, 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 for 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 popular binary 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 and top binary options signals do 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 colour?

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 colour.

• 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 colour 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.