In this article, we are going to explain a simple trading system with Heikin Ashi charts to eliminate “market noise” so that we have a clearer picture of price action and especially trends. In this case, the methodology makes use of several modified indicators for Metatrader 4 based on Heikin Ashi candlesticks, which we include below for free download. Therefore, this system can only be used on this trading platform. One of its advantages is that it includes an alert indicator that shows us precisely when we must enter the market.

Basically it is a trend following system that seeks to enter the market during price corrections, in such a way that it gives us the possibility to open new positions at better prices. Its rules are quite clear and include rules for placing the stop loss and take profit target (based on another custom indicator).

As always, it is recommended to test this system in a demo account before using it to trade with real money.

Trading system settings and indicators

  • Recommended trading instruments: The system can be used on any asset or financial instrument, including Forex, precious metals and others.
  • Recommended Time Frame: The system can be used in any time frame, but it produces the best results on the 5 minute (M5) and 15 minute (M15) charts.
  • Recommended brokers: The system can be applied in any broker with the MT4 platform – See list of Metatrader 4 brokers.
  • System indicators – This trading system uses the following technical indicators, some of which are modified indicators for MT4:
    • Traditional smoothed Heikin Ashi candles (standard configuration).
    • Heikin_Ashi_Exit (modified indicator).
    • Heikin_Ashi_Smoothed_Alerts (modified indicator).
    • Spread (modified indicator)
    • CurrencyStrengthAlerts (modified indicator), indicates the strength/weakness of the different pairs, which can help you find currency pairs with upward or downward trends.
    • DWMRanges (modified indicator) – It is used to indicate the daily price range that we use to set the take profit target.
    • pipsometer_decilam_edit_2 (modified indicator).

In addition to the modified indicators, there is a template that allows the trader to implement the system more easily on the platform without the need to load the indicators.

All the technical indicators and the system template can be downloaded free of charge at the following link:

Noise Free Template and System Indicators

Trading System Rules

The rules for opening buy and sell positions with this strategy are as follows:

Buy positions

To open a buy position we wait for the following signals:

  • The smoothed Heikin Ashi crosses above the Heikin_Ashi-Exit from below.
  • After the bullish cross of both indicators, we wait for a bearish pullback in the price.
  • If the Heikin_Ashi_Exit indicator maintains its green color and the smoothed Heikin Ashi indicator changes its color to blue (indicating that the market is resuming its uptrend), we open a buy position at the time the smoothed Heikin Ashi turns to blue color. The arrow indicates precisely where the color change occurs in the smoothed Heikin Ashi.
  • The position is opened at the next candle after the signal candle.
  • Stop Loss: It is placed below the lower low previous to the signal candle.
  • Take profit: The position is closed at the maximum of the daily range, indicated by a horizontal line.

Sell positions

To open a sell position we wait for the following signals:

  • The smoothed Heikin Ashi crosses below the Heikin_Ashi-Exit from above.
  • After the bearish crossover of both indicators, we wait for a bullish pullback in the price.
  • If the Heikin_Ashi_Exit indicator keeps its red color and the smoothed Heikin Ashi indicator changes its color to purple (indicating that the market is resuming its downtrend), we open a sell position at the time the smoothed Heikin Ashi turns to violet color. The arrow indicates precisely where the color change occurs in the smoothed Heikin Ashi.
  • The position is opened at the next candle after the signal candle.
  • Stop Loss: It is placed above the higher high prior to the entry signal.
  • Take profit: The position is closed at the minimum of the daily range, indicated by a horizontal line.

As we can see, this trading system does not only seek to take advantage of trend movements. It tries to enter the market after the price corrections that occur after bullish or bearish breakouts, trying to take advantage of the market momentum. In this case, the system is not trying to predict trends, but rather to take advantage of confirmed existing market trends.

Trading system example

Heikin Ashi trading example

Buy signal generated by the trading system on a M15 chart of the AUD / USD pair

In the image above we have an M15 price chart of the AUD/USD pair with a clear buy signal. In this case, we first have a bullish cross of the Heikin_Ashi_Exit and the smoothed Heikin Ashi which gives us the first early signal of a possible buy trade. After this crossing, we wait for the price to make a bearish correction, after which we see how the price begins to resume the uptrend and the smoothed Heikin Ashi turns blue again (bullish movement), which gives us the final signal for opening the buy position.

Shortly after opening the buy position, the price begins to rise strongly and in a short time, it reaches our profit-taking objective, which in this case is the maximum of the daily range, indicated by a horizontal line. As for the stop loss, we place it precisely below the previous lower low, as shown in the image.