Stop Using Heiken Ashi: A Better Indicator for Traders

You NEED to stop using the Heiken Ashi RIGHT NOW. I found an indicator that is infinitely better than the Heiken Ashi. The Heiken Ashi is an indicator that a lot of traders use to find the general direction of the market, clearing out the noise of regular candlesticks. But what if I told you, I found a secret indicator that performs WAY better than the normal Heiken Ashi.

Actually, to be specific, I backtested this indicator and it’s 2x more profitable than the normal Heiken Ashi. This indicator uses a unique approach, and I’m going to share with you what the indicator is, how to use it to its best potential, and I’m even going to share with you a profitable strategy with this indicator. Let’s get straight to it.

Understanding Normal Candlesticks and Heiken Ashi

Here are your typical, normal candlesticks. There’s a bunch of red and green everywhere and the chart is pretty hard to read with all the noise. This is bad because it could lead to false signals. This is a chart with the Heiken Ashi. It eliminates the noise so that the candles are replaced and you can clearly see which direction the market is heading, making it easier to read the chart.

But this indicator isn’t perfect. One of the main issues with the Heiken Ashi is that it doesn’t provide the juicy information normal candlesticks do. It only provides the smoothed-out version of the price, not the real price, making it difficult to find chart patterns or key areas of support or resistance.

Introducing the New Indicator

That’s until god himself made this new secret indicator. Actually, his name is jackvmk, but you get my point. It’s a good indicator. Now, the reason this indicator is so good is because, instead of replacing your candlesticks, it just adds a Heiken Ashi overlay, so you can see both the price action of the candles AND the Heiken Ashi all in one giving you the best of both worlds.

Another great thing about this indicator is that it’s way better at not providing false signals compared to the normal Heiken Ashi. For example, this is a chart with the normal Heiken Ashi. As you can see, it provided a lot of green candles in this uptrend, but then it placed some red ones where it could easily fake you out and make you sell early. Now, this is the same exact chart with the improved version of the Heiken Ashi and, as you can see, it only provided green candles. So there’s no fakeouts and you would have made way more profit on this trade.

How to Add and Configure the Indicator

So now that we know why this indicator is good, let’s add it to our chart and give you the best possible settings for this indicator. I’ll be using TradingView as my charting platform. If you don’t yet have it, I’ll leave a link in my description.

Go to the indicators tab and type in “smoothed Heiken Ashi” and click this one by jackvmk. Next, go to the settings. Now the optimal settings depend on what type of trader you are. If you’re a short-term trader, I would recommend changing these two settings to 5 and 5, as this makes it better at analyzing short-term price movement. If you’re more of a long-term trader, change these settings to 20 and 20, as that will make it better at finding long-term trends. For the sake of this video, though, we are going to be somewhere in the middle, so we are going to keep it at the default of 10 and 10.

Using the Indicator Effectively

This is how I use the indicator. Green candles signal an uptrend, and red candles signal a downtrend. This means it’s great for signaling possible reversals. For example, here the market is in a downtrend signaled by these red Heiken Ashi candles, but then, all of a sudden we got a green candle signaling a possible market shift. Then the market heads upwards.

But, here’s a secret trick you can use to raise the chance of you finding these perfect reversals. You can use the size of the Heiken Ashi candles as a way to identify strength. For example, here the candles start off small and start to slowly get larger and larger signaling. The market is gaining momentum and strength. The same thing with weakness. If the candles start to get smaller, you can easily identify the market is losing momentum and is getting ready to reverse.

So as an example, here the chart is in a downtrend signaled by the red candles, but you can start to see the candles are getting smaller and smaller, showing it’s losing the downwards momentum. Then we get a green candle. This signals a market shift is likely to occur, which is exactly what happens.

Profitable Strategies with the New Indicator

Now you know the basics. You know why this new indicator is better than the normal Heiken Ashi and where to begin to start reading it. Now it’s time to get into some actual profitable strategies using this amazing indicator. But first, let’s get into some of my favorite strategies with this indicator.

I want to make this clear: You shouldn’t just enter a long trade because the Heiken Ashi turns green and enter a short position just because it turns red. This will not work in the long term. Instead, you should do this:

First, you want to find a strong downtrend. Again, we can do this by finding red Heiken Ashi candles and we want to see the candles getting larger and larger signaling this is a strong downwards trend. The next step is finding a trend change. We can do that by seeing the red candles start to get smaller and then a color shift from red to green. But you aren’t going to enter yet. Instead, we are essentially going to use the new Heiken Ashi candles as support. Wait for the price to do a pullback and come back down to the Heiken Ashi candles, but we still need a little more confirmation. Wait for the price to show it’s going to respect this area by giving a green candle. Once we get the green candle, we can now officially enter the trade.

Set your stop loss at the low of where the Heiken Ashi candles earlier and set your take profit to a 1.5 risk-to-reward ratio. You are then going to wait for the price to hit your take profit. But we aren’t done yet. Once the price hits your take profit, sell half of your position for guaranteed profits. Then move your stop loss to your entry. We are then going to wait for the Heiken Ashi to turn red to sell the rest of our position. Once it does, exit the trade fully for some really nice profits. This is a beautiful strategy. I absolutely love using it. Test it out and let me know how it worked for you on Instagram.

Conclusion

Next, we are going to go over how I made over $70,000 in 60 days using this specific strategy. This one is one of my favorites I use every day. Thanks for reading and I’ll see you guys next time.

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