Most forex traders make a profit whenever the market starts trending. This is because trending markets generally imply strong volatility that moves in one direction. Traders make profits whenever there is sufficient market movement or volatility. However, the price should move in the direction predicted by the trader rather than moving back and forth within a short range. Enables huge profits.
Trend reversal strategies are probably some of the most profitable trading strategies. A trend reversal strategy means that a trader can predict when the direction of a trend is about to reverse. Since it is moving in the direction of the trade, it can hold profitable trades, which can lead to huge profits.
Trend reversal strategies can be very profitable. However, predicting trend reversals can prove to be very difficult. Traders can use high-probability trends following technical indicators to predict such trend reversals. With the right combination of trend following technical indicators, traders can systematically identify trend reversals based on clear signals.
heikin ashi smooth
Heiken Ashi Smoothed is a high probability trend following technical indicator based on the concept of Heiken Ashi candlesticks and moving averages.
“Heiken Ashi” literally means average bar in Japanese. This indicator is rightly called as such. This is because the Heiken Ashi Smoothed indicator plots trend direction bars based on the average price of past price movements.
The trend direction is indicated based on the color of the bars. Lime bars indicate a bullish trend and red bars indicate a bearish trend.
Unlike its counterparts, the Heiken Ashi Smoothed indicator calculates average price movements, while the Heiken Ashi Candlesticks plot price candlesticks with modified opening and closing prices based on average historical prices. This causes the Heiken Ashi Smoothed indicator to characteristically move closer to the moving averages, with smoother reversals, but still very sensitive to price action movements. It is less susceptible to false trend reversal signals, but at the same time lags less compared to most moving averages.
alternative glance
Alternative Ichimoku is a long-term trend following a technical indicator based on the Ichimoku Kinko Hyo. However, instead of including all the lines included in the Ichimoku Kinko Hyo system, the Alternative Ichimoku indicator focuses only on long-term trends.
The Alternative Ichimoku indicator plots two lines with the space between them shaded by vertical lines. This creates a “cloud” or cloud-like area in the Ichimoku Kinko Hyo system. The interaction between the two lines indicates the long-term trend direction.
If the fast-moving line is above the slow-moving line, the market is considered to be in an uptrend. However, if the faster line breaks below the slower line, the market is in a downtrend.
A blue line is also drawn inside the shaded part. Blue is closer to the fast-moving line when the trend is gaining momentum and closer to the slow-moving line when the trend is slowing down.
Traders can use the intersection of two lines as an indicator of trend reversal. This should be used in conjunction with other momentum indicators.
Traders can also use the alternative Ichimoku long-term trend display to filter out trades that are against the direction of the trend.
Stochastic Oscillator
The Stochastic Oscillator is a popular and widely used momentum indicator and a family of oscillator-type indicators. It is used to identify the direction of momentum and the overbought and oversold conditions that are the price from the mean reversal.
Plot two lines oscillating between 0 and 100. Trend direction is identified based on how the two lines interact. Bullish momentum is indicated when the fast line is above the slow line, and bearish momentum is identified when the fast line is below the slow line.
The Stochastic Oscillator also has markers at levels 20 and 80. A stochastic line below 20 indicates an oversold condition and a line above 80 indicates an overbought condition. Both conditions are prime numbers of mean inversions. Crossovers that occur in these areas tend to be more likely to result in real momentum reversals in price action.
trading strategy
The Heiken Ashi Ichimoku Trend Reversal Forex Trading Strategy is a trend reversal strategy based on the confluence of trend reversal signals from the Heiken Ashi Smoothed and Alternative Ichimoku indicators, as well as the momentum indication of the Stochastic Oscillator.
The trend direction of the Heiken Ashi Smoothed indicator is simply based on the color change of the bars.
The alternative Ichimoku signal is simply based on the crossover of two lines. The blue line should also stick near the pair’s faster line, which indicates strong momentum in the reversal.
Finally, we identify the direction of momentum using the stochastic oscillator line. This is simply based on how the two lines overlap or intersect.
index:
- Heiken_Ashi_Smoothed
- Alternative_Ichimoku
- Stochastic Oscillator
- %K Duration: 19
- %D period: 6
- Deceleration: 9
Preferred timeframe: 15 minute, 30 minute, 1 hour and 4 hour charts
Currency pair: Forex Major, Minor, Cross
Trading session: Sessions in Tokyo, London and New York
Trading setup
entry
- The Heiken Ashi Smoothed bar should turn lime-colored as the price candle moves above the bar.
- The fast line of the alternative Ichimoku indicator should have the blue line stay close to the fast line and cross over the slow line.
- The fast solid line of the Stochastic Oscillator should be above the slow dotted line.
- Please confirm these conditions before entering a buy order.
stop loss
- Place a stop loss on the support below the entry candle.
Exit
- Close the trade as soon as the Heiken Ashi Smoothed bar turns red.
sell trade settings
entry
- The Heiken Ashi smoothed bar turns red when the price candle moves below the bar.
- The fast line of the alternative Ichimoku indicator should have the blue line stay close to the fast line and cross below the slow line.
- The fast solid line of the Stochastic Oscillator should be below the slow dotted line.
- Please confirm these conditions before entering a sell order.
stop loss
- Place a stop loss at the resistance above the entry candle.
Exit
- Close the trade as soon as the Heiken Ashi Smoothed bar turns lime.
Conclusion
This trend reversal strategy based on the confluence of three technical indicators can work very well in markets with a strong trend trend.
The combination of the three indicators has a synergistic effect.
Alternative glances represent long-term trends.
The Heiken Ashi Smoothed indicator shows the main trend directions.
The Stochastic Oscillator represents short-term momentum.
All three together produce a high-probability trend reversal signal and can result in a high-yielding trade.
Forex Trading Strategy Installation Instructions
Heiken Ashi Ichimoku Trend Reversal Forex Trading Strategy is a combination of Metatrader 4 (MT4) Indicator and Template.
The essence of this forex strategy is to convert accumulated historical data and trading signals.
Heiken Ashi Ichimoku Trend Reversal Forex Trading Strategy provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.
Based on this information, traders can anticipate further price movements and adjust this strategy accordingly.
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How to install Heiken Ashi Ichimoku Trend Reversal Forex Trading Strategy?
- Download Heiken Ashi Ichimoku Trend Reversal Forex Trading Strategy.zip
- Copy the *mq4 and ex4 files to the metatrader directory /experts/indicators/.
- Copy the tpl file (template) to the Metatrader directory /templates/.
- Start or restart your Metatrader client
- Choose a chart and timeframe to test your forex strategy
- Right click on the trading chart and hover over “Templates”
- Move right and select Heiken Ashi Ichimoku Trend Reversal Forex Trading Strategy
- You can see the Heiken Ashi Ichimoku Trend Reversal Forex Trading Strategy available on the chart
*Note: Not all forex strategies come with mq4/ex4 files. Some templates are already integrated with his MT4 indicator on the MetaTrader platform.
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