TraderDesk HA Swing Strategy

[TraderDesk]

This topic is about trading with Heiken-Ashi candles using very few indicators if any and looking at Price Action. The timeframes to look at will be multiple 1,5,15,30,60,240,1440 but the main TF to trade off will be the 30 and 60 minute Heiken-Ashi charts.

I will keep the strategy simple from the opening and closing of positions as well as risk management guidelines. This strategy is meant to catch swings that usually will last from 1 to 3 trading days but when there is a big breakout can last for weeks.

Trends is where this strategy makes profit so I would look at the 240 minute chart and daily chart as well to give me higher probabilities for a move in their direction.

Important: This strategy is optimize for GBP/JPY

SETUP:

Heiken-Ashi smooth indicator with settings at-
MaMetod = 2;
MaPeriod = 20;
MaMetod2 = 3;
MaPeriod2 = 3;

HA indicator running on 5, 15, 30, 60, 240 and daily charts.

Primary rule for opening positions:
When the 30 minute HA turns color look to add position in the direction of the color.
i.e. Lets say price action breaks up and crosses the HA line turning the candle from RED to BLUE. I would wait for the close of the candle to increase the probability that price action is now in a bull swing.

HA1.png

Look at the 4 hour HA chart. If it is BLUE then this is a continuation of a larger trend so the probability of a large uptrend in price action is greater then if this was a counter-trend so plan accordingly.

Look at the daily HA chart. If this is also BLUE then you know that major trend is up so that is giving impetus for strong moves.

When the 30 minute HA changes color I would typically look for moves between 100-300 pips from 1 to 4 days duration depending if it a trend trade or counter-trend trade.

I would set a TP at 100/200/300 pip levels depending on the strength of the move. For example you can use the 5 or 15 minute HA chart to have a moving S/L behind the HA line. This all depends on your trading style and risk parameters.

Adding to existing trade can be done by waiting for PRICE to retrace close to the 30 minute HA line then adding an additional position with S/L behind the 30 minute HA line.

R/R Risk/Reward ratio that I look for is at least 1:2 looking for an average of 1:3. So if I am risking 50 pips on a trade I would target at least 100 pip profit.

That is it in the most simplistic form. The idea is to catch swing trades with an average 1:3 R/R and a 70% win rate. Using this strategy you will not be making trades every day but when you do trade you will make pips, lot's of pips.

You need patient and an understanding of the volatility of the currency pair. Also it helps if you look at the probabilities of past price actions with current price actions to give you that edge.

This is a manual strategy which means traders can and will trade differently even if you follow the basic rules. I am very familiar with GBP/JPY price action and the settings with the HA indicator works with this pair in most situations.

I will post some of my live trades to give examples in the coming days.

Tommaso has coded a few EA's that can help which I have attached below. Thanks Tommaso
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HA smooth indicator:

HASmoothedwithAlertTDStrategy.mq4

version for 6xx builds:

HASmoothedwithAlertTDStrategy6XX.mq4

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Latest EA for helping to automate HA strategy:

TraderDeskHeikenAshiAE.mq4

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This EA will open after a cross over the HA line a buy/sell, the user can set the delays for the trade as he/she wants.
It is set with:
DelayTheEntryForXBars
PriceWithinHALine

The EA has no trailing function, the SL and TP can be set, it is intended for opening the trade, the exit is best to find manually

HeikenAshiHelper.mq4

Latest EA from milanese
This setting is for selecting the higherTF

Code: Select all

extern double  HigherTF=240;

This variables are used for the actual TF
Here you set the entry delay and the min value the price must be in HA Line for opening a new position. The
HA_SLMovingDistance is used for give some extra pips to the SL too you have the setting SetBEminPip what is used for setting the min distance the SL must have from the actual price

Code: Select all

extern int  DelayTheEntryForXBars=2;
extern double  PriceWithinHALine=10;
extern double  HA_SLMovingDistance=10;

HeikenAshiHelperF.mq4

HeikenAshiHelperE.mq4

TraderDesk
I have attached an excel spreadsheet that can help give a picture of trading parameters like costs, profits, pips needed, leverage etc....Please feel free to add to the spreadsheet and I will post the updated copy here.

traderdeskjan6v2.xls

[milanese]

Hi TD,

as always I am here for all EA requests

Cheers and a great weekend

Tommaso

[milanese]

TraderDesk asked me for a better helper EA with a moving SL, the new one moves the SL in that manner that the SL is always behind the HA line by the pips set in HA_SLMovingDistance ..

I will attach the EA in first post as always in future

Cheers

Tommaso

[TraderDesk]

Let's take a look at the potential setup for next week:

4 hour chart:

HA4hour.png

As you can see Price Action is in a bear trend.

Because the Daily chart is in a strong bull trend which you can see with price being above the HA line since Nov.5 2013 it reflects on the 4 hour chart with short bear runs that turn into very profitable bull trades when PRICE crosses up and over the HA line for runs of 150, 300 and 650 pip swings......

Now let's drill down to the 30 minute chart:

HA30minute.png

What I see is a confused Monday morning and I need to see if PRICE goes below the 30 minute HA line with a candle closed or PRICE goes above 172.60 with a 4 hour candle close.

If it is the former then I would open a sell position around 171.4 TP at 170 area with a S/L above 172. Remember what I said about R/R well with this order I would be at least 1:2 and if it looks like PRICE will drop the next day as well I might target 168.4 which would give me a 1:5 R/R.

If price action is the latter i.e. bullish then I would look to buy around 172.4 looking for my first target around 173.7-174 with S/L around 171.60. The bullish potential buy order is tricky if the 4 hour chart does not show PRICE close above the HA.

Worst case scenario is the Monday is a flat and ranging day where price action is no more than 60 pips. I would then drill down on the 15 minute chart to keep an eye on where support and resistance area's crop up. This will then give me a clue to what to watch for on Tuesday potential moves.

So this is just a snapshot of what I would start to look at just to set one position. Once I am in a position or trade then I need to see where I can add others as risk-free as possible with maximun P/L...

[garyfritz]

Thanks, TD. So you *would* enter a short position based on the bearish H4 trend, even though the D1 trend is bullish? Presumably a long position (going with the D1 trend) has a better shot of success. But the short position is good enough to go against the D1 trend?

With MTF strategies like this, I hate having to flip between charts. Tommaso , any chance of an HA indi that shows the H4/D1 trend on an M30 chart? You could do it with a straight line of dots in a separate subwindow, so you just needed to check the H4/D1 dot colors under an M30 bar to see what the longer trend is on that M30 bar ...

[TraderDesk]

Hi Gary,

In many cases I would since I am very careful with my R/R and SL. I would consider this a counter-trend trade.

If Price on the daily chart is very close to the HA line then I would be more careful. I look for swing trends and the 30 minute chart is a very good place to see the signs. H4 chart keeps me in the probability area as I know a position on the 30TF that crosses over into bull territory(HA turns BLUE) while the H4 HA is already BLUE increases the odds for a successful trade.

There is also a feel to the market that I cannot quantify on this forum. After watching price action you get to recognize patterns that will give you an edge in the market.

Also for me it is important to see how close price action is to the 30, 240 and D1 HA line as it shows potential breakouts... Just seeing a color on the 30 minute chart of other timeframes does not give me enough info to my eyes. I do have multiple monitors so I run each timeframe on a separate monitor which gives me quick visual results.

[TraderDesk]

Using this Strategy:

Having been in the Forex market for many years as a retail trader my experience with trading successfully has been this:

Know your currency pair
I mean really know it. Watch how the patterns develop on all timeframes. Learn to identify patterns on the tick level which can show you large players entering heavy positions quietly or time-base algo's implementing trading decisions etc...

In my case with GBP/JPY I watch GBPUSD AND USDJPY pairs as well as their correlation patterns with GBP/JPY. Volatility is great to have when there is lot's of liquidity.

Follow the Trend
I will use an analogy of waves in the ocean when I talk about trends as I do love the sea

It only makes sense but you would be amaze how many traders disregard the trend. The trend is like a long, slow swell that might not be immediately noticeable but the power behind it is immense. For very profitable trades be on that swell so keep your eye on the Daily charts.

When I trade currency pairs I look at liquidity. Some currency pairs reside in the ocean like EUR/USD, GBP/USD etc.... and others reside in ponds like GBP/NOK etc.... I do not want to trade in ponds as even the small fish have major effects but I do want to be in the ocean as even the whales have very limited effect so I can believe that the larger waves will stay largely uninfluenced to local and immediate events. Liquidity is very very good

This strategy is based on PA(Price Action) so we look to identify trends. There are many trends depending on the TF(time-frame) you are looking at so in our case we will be looking three main trends. The 30, 240 and D1 TF's for our main trading logic. Now each one is a wave in the ocean and each has a corresponding effect in the marketplace, i.e. 30 minute is less powerful then the 240 which is less powerful then the D1 time-frames. Simple stuff but very important.

Now I listen to price action because it is the sum of all the market forces. The larger the time-frame the bigger the picture of influences within the currency pair and visa-versa the smaller the time-frame the smaller the picture of influences. Keeping with the ocean wave analogy small waves are choppy and have immediate effects that are not long lasting while the bigger waves are slower but of longer duration with power behind them.

I want to get trades place on the more powerful waves but I need to find the trough of the wave to place my position since the amount of pips between the trough and crest can be very considerable as these are powerful waves(30,240,D1) and my risk management rules will constrain the amount of risk I can take.

This is one of the reasons I use Heiken-Ashi as it gives me visual patterns to see and feel the waves within the GBP/JPY pair. Remember, each currency pair has their own wave patterns so what works for one pair does not mean it will work for another. Even when I have identify patterns within a currency pair does not mean what is familiar will stay the same for the next year so I have to learn to adjust with changes within the market.

Probability scenario's:
When I look at creating and implementing a trading decision one of those factors that weigh upon my final decision is the probability of the trade being successful. If I see a setup that in the past has been 70% successful I will trade with that number or if it was 40% successful in the past I will trade using that number. This is important for several reasons which has to do with risk and money management. My exposure goes up when I have a higher chance of succeeding and lower if in the past I show a lower probability of succeeding. How I do this is beyond this thread but you should start with patterns and volatility within price action.

Money management with HA strategy:
Very simply i want to maximize my Risk/Return while keeping draw-down to the level that I am comfortable with. So I look to place trades near the crest or trough of the 30 minute wave.

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If you do use this strategy keep in mind that the way I trade it is not necessarily the way you will trade it. This is because each trader will apply their own experience that will hugely influence their trading decisions. What I hope you get from this strategy is to open your eyes up to price action and pattern analysis without all the indicators etc... that will help you in your search to become a more successful trader.

[TraderDesk]

TP(Take-Profit):

This is always an area that can change depending on the trader, risk management, currency pair etc.... In this case I am trading GBP/JPY so I will look at what are the smarter ways to take profit off of the table.

Now as I am looking at my positions being placed on the waves I need to know the amplitude of the waves that my positions are riding on. Amplitude is measured from rest to crest to quote my physics teacher so I now look back in history both short-term and long-term to see the average amplitude that will be measured in pips and duration.

Amplitude = pips from rest to crest
Duration = length of time from rest to crest
WAVE= TF trading on

These are some of the variables I look at with deciding on a TP level. I have different TP levels with different positions opened on the WAVE and even multiple TP levels with one position so I could close half a position at one level and the other half at a different level. These all depend on my money and risk management rules that I have in place for the position. I don't apply the same rules retroactively to all my positions, for my main trade I could have different rules then to the additional positions I have running.

Another way to look for TP is if you have a trade open on the 30 minute TF you can run a moving SL on a lower TF chart using the HA line like on the 5 minute chart. If I sold on the 30 minute chart and price has moved down putting my trade into profit I can then say as long as price action on the 5 minute chart is below the HA line then I stay in the trade and if price crosses above it then close the position. This works great in strong trending markets but in a slow movement down in might make better sense to put SL on the 100, 200, 300 pips levels... I always have to look at the market to determine what makes more sense. Here is am EA that Tommaso has coded to help you with the moving HA SL.

HeikenAshiHelperB.mq4

You can now see how very quickly traders can have completely different results from other traders running the same basic strategy. Heck I can using Reuters and you can be using UBS and I get better results because Reuters has traditionally better liquidity with GBP pairs then UBS so infrastructure becomes a major factor very quickly when you scale in size.

Different strategies:
I like to run one strategy for a particular asset class, in this case I use the HA strategy. But another type of strategy can do the same like Bob's 10.6 strategy works similar and if you look at the 30, 240 and D1 HA values they are very similar to 10.6 strategy, just different ways at looking at the same info...

[brinol]

Hi TD
Just subscribed and look forward to taking it in and following along ..

Regards : Brian

[tommiho]

Hi TraderDesk,
looking forward to read more.
subscribed too.