Heiken Ashi – HMA Deep Trend Retracement Forex Trading Strategy – MT5
<p>There are many traders who are infatuated with the idea of getting that one big trade. Some traders try to do this by anticipating reversals. Many would try to read a forex chart and try to predict reversals based on where they see the support and resistance levels are. There is nothing wrong with this concept. Anticipating reversals based on support and resistance levels is a viable trading strategy. Many professional traders use this style of trading. However, traders who are not yet used to reading market flow might find it difficult to identify the correct support and resistance levels where price action is more likely to reverse. New traders might experience disappointments when they see consecutive losses and draw down periods because of this.</p>
<p>Which one would be easier, anticipating reversals or trading with the trend?</p>
<p>Trading with the trend would most likely be much easier compared to anticipating reversals because trading with the trend means you are trading with the general flow of the market. Traders who can identify the correct trend direction can then pick the right trade direction. If you get this right then chances are your trade would be moving in profit sooner or later, which means you are more likely to be profitable just by picking the right trade direction.</p>
<p>Although picking the right trade direction based on the trend can significantly increase the likelihood of a profitable trade, traders still should not just be blindly entering a trade. Some trade entries are more efficient than others. As such, it is best to try to identify the trade entries which can give us the most profits with the least risk.</p>
<p>Pullbacks due to deep retracements are some of the most efficient trade entry points. It is like entering a trade on a discount. It is as if you are telling the market that you are willing to trade in the direction of the trend but you would want a steep discount for it.</p>
<p>Let us explore a trading strategy which trades on such steep pullbacks while still conforming with the trend using the Hull Moving Average, Heiken Ashi Smoothed indicator, and the Stochastic Oscillator.</p>
<h2><strong>Heiken Ashi Smoothed</strong></h2>
<p>“Heiken Ashi” in Japanese, translates to “average bars”. The Heiken Ashi Smoothed indicator is aptly named as such.</p>
<p>The Heiken Ashi Smoothed indicator is a trend following technical indicator which plots bars on the price chart. These bars are based on an average of price over a given period. The bars it plots are characteristically similar to a moving average line which is smoothened out.</p>
<p>The color of the bars change depending on the direction of the trend. This version of the Heiken Ashi Smoothed indicator plots turquoise colored bars to indicate a bullish trend bias, and crimson colored bars to indicate a bearish trend bias.</p>
<p>The length of the wicks attached to the bars also lengthen in the direction of the trend when it detects a strengthening momentum and shortens when it detects the weakening of the momentum in the direction of the trend.</p>
<p><img class="alignnone size-full wp-image-65411" src="https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Heiken-Ashi-Smoothed.png" alt="Heiken Ashi Smoothed" width="977" height="672" srcset="https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Heiken-Ashi-Smoothed.png 977w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Heiken-Ashi-Smoothed-300×206.png 300w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Heiken-Ashi-Smoothed-768×528.png 768w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Heiken-Ashi-Smoothed-218×150.png 218w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Heiken-Ashi-Smoothed-436×300.png 436w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Heiken-Ashi-Smoothed-100×70.png 100w" sizes="(max-width: 977px) 100vw, 977px" /></p>
<p>We will be using the Heiken Ashi Smoothed indicator as the main basis for our trend bias and thus our trend direction.</p>
<h2><strong>Stochastic Oscillator</strong></h2>
<p>The Stochastic Oscillator is a widely used momentum-based oscillator. This indicator attempts to detect momentum based on an underlying formula which uses the close, lows and highs of price within a preset period.</p>
<p>The Stochastic Oscillator plots two lines which oscillate within the range of zero to 100. The short-term momentum may be identified based on how these two lines interact. The short-term momentum is bullish whenever the faster line is above the slower line, and bearish whenever the faster line is below the slower line.</p>
<p>The range of the Stochastic Oscillator also has markers at levels 20 and 80. The area below 20 indicate an oversold level. Bullish crossovers from this area are high probability mean reversal signals. The area above 80 indicate the overbought level. Bearish crossovers coming from this area is also a high probability bearish mean reversal.</p>
<p><img class="alignnone size-full wp-image-65410" src="https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Stochastic-Oscillator.png" alt="Stochastic Oscillator" width="977" height="672" srcset="https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Stochastic-Oscillator.png 977w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Stochastic-Oscillator-300×206.png 300w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Stochastic-Oscillator-768×528.png 768w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Stochastic-Oscillator-218×150.png 218w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Stochastic-Oscillator-436×300.png 436w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Stochastic-Oscillator-100×70.png 100w" sizes="(max-width: 977px) 100vw, 977px" /></p>
<p>Given that the Stochastic Oscillator is mainly used to identify overbought and oversold markets, we will use this indicator to identify mean reversals coming from such conditions. However, we will only trade mean reversal signals which conform with the direction of the trend. This usually occurs on deep retracements or pullbacks during a trending market.</p>
<h2><strong>Hull Moving Average</strong></h2>
<p>Moving average lines are excellent tools for identifying trend direction as well as trend reversals. However, most moving average lines tend to be very lagging.</p>
<p>The Hull Moving Average (HMA) is a variation of the moving average line which was developed to decrease the lag, increase responsiveness, while reducing noise. It reduces noise by incorporating a smoothening of the line, which makes it less susceptible to market noise caused by price spikes. It also decreases lag thereby increasing responsiveness by emphasizing the most recent price data over older price points.</p>
<p>This version of the HMA plots a line which changes color to indicate the direction of the trend. It plots a blue line to indicate a bullish trend direction and a red line to indicate a bearish trend.</p>
<p><img class="alignnone size-full wp-image-65409" src="https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Hull-Moving-Average.png" alt="Hull Moving Average" width="977" height="672" srcset="https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Hull-Moving-Average.png 977w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Hull-Moving-Average-300×206.png 300w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Hull-Moving-Average-768×528.png 768w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Hull-Moving-Average-218×150.png 218w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Hull-Moving-Average-436×300.png 436w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Hull-Moving-Average-100×70.png 100w" sizes="(max-width: 977px) 100vw, 977px" /></p>
<p>We will modify the settings of this HMA line to compute for 14-bars to make it more suitable for short-term trend changes and use the changing of the color of the line as our short-term trend reversal signal.</p>
<h2><strong><em>Bullish Heiken Ashi – HMA Deep Trend Retracement Setup</em></strong></h2>
<ul>
<li>Price action should be generally above the Heiken Ashi Smoothed bars, while the bars plotted are turquoise.</li>
<li>Price action should retrace deeply causing the Stochastic Oscillator lines to drop below 20.</li>
<li>The faster Stochastic Oscillator line should cross above the slower line.</li>
<li>Enter a buy order as soon as the HMA line changes to blue.</li>
<li>Set the stop loss at the support below the entry candle.</li>
<li>Close the trade as soon as the HMA line changes to red.</li>
</ul>
<p><img class="alignnone size-full wp-image-65408" src="https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Bullish-Heiken-Ashi-–-HMA-Deep-Trend-Retracement-Setup.png" alt="Bullish Heiken Ashi – HMA Deep Trend Retracement Setup" width="977" height="672" srcset="https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Bullish-Heiken-Ashi-–-HMA-Deep-Trend-Retracement-Setup.png 977w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Bullish-Heiken-Ashi-–-HMA-Deep-Trend-Retracement-Setup-300×206.png 300w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Bullish-Heiken-Ashi-–-HMA-Deep-Trend-Retracement-Setup-768×528.png 768w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Bullish-Heiken-Ashi-–-HMA-Deep-Trend-Retracement-Setup-218×150.png 218w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Bullish-Heiken-Ashi-–-HMA-Deep-Trend-Retracement-Setup-436×300.png 436w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Bullish-Heiken-Ashi-–-HMA-Deep-Trend-Retracement-Setup-100×70.png 100w" sizes="(max-width: 977px) 100vw, 977px" /></p>
<h2><strong><em>Bearish Heiken Ashi – HMA Deep Trend Retracement Setup</em></strong></h2>
<ul>
<li>Price action should be generally below the Heiken Ashi Smoothed bars, while the bars plotted are crimson.</li>
<li>Price action should retrace deeply causing the Stochastic Oscillator lines to breach above 80.</li>
<li>The faster Stochastic Oscillator line should cross below the slower line.</li>
<li>Enter a sell order as soon as the HMA line changes to red.</li>
<li>Set the stop loss at the resistance above the entry candle.</li>
<li>Close the trade as soon as the HMA line changes to blue.</li>
</ul>
<p><img class="alignnone size-full wp-image-65407" src="https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Bearish-Heiken-Ashi-–-HMA-Deep-Trend-Retracement-Setup.png" alt="Bearish Heiken Ashi – HMA Deep Trend Retracement Setup" width="977" height="672" srcset="https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Bearish-Heiken-Ashi-–-HMA-Deep-Trend-Retracement-Setup.png 977w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Bearish-Heiken-Ashi-–-HMA-Deep-Trend-Retracement-Setup-300×206.png 300w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Bearish-Heiken-Ashi-–-HMA-Deep-Trend-Retracement-Setup-768×528.png 768w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Bearish-Heiken-Ashi-–-HMA-Deep-Trend-Retracement-Setup-218×150.png 218w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Bearish-Heiken-Ashi-–-HMA-Deep-Trend-Retracement-Setup-436×300.png 436w, https://www.forexmt4indicators.com/wp-content/uploads/2020/12/Bearish-Heiken-Ashi-–-HMA-Deep-Trend-Retracement-Setup-100×70.png 100w" sizes="(max-width: 977px) 100vw, 977px" /></p>
<h2><strong>Conclusion</strong></h2>
<p>This trading strategy is a trend following strategy which trades on markets that trending on the mid-term horizon.</p>
<p>It attempts to identify deep retracements using the Stochastic Oscillator which becomes overbought or oversold in such cases.</p>
<p>It then makes use of the Hull Moving Average line to confirm the end of the retracement.</p>
<p>This trend following strategy would work well in the right trending market environment. One which has a clear wave like structure which oscillates up and down as price becomes temporarily overbought or oversold, while still moving in a generally trending manner.</p>
<p><h3><span><strong><br />
Forex Trading Strategies Installation Instructions</strong></span></h3>
<p>Heiken Ashi – HMA Deep Trend Retracement Forex Trading Strategy – MT5 is a combination of Metatrader 5 (MT5) indicator(s) and template.</p>
<p>The essence of this forex strategy is to transform the accumulated history data and trading signals.</p>
<p>Heiken Ashi – HMA Deep Trend Retracement Forex Trading Strategy – MT5 provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.</p>
<p>Based on this information, traders can assume further price movement and adjust this strategy accordingly.</p>
<p><iframe src="https://www.youtube.com/embed/YczVA9lhppk" width="500" height="315" frameborder="0" allowfullscreen="allowfullscreen"></iframe></p>
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<h3><strong>How to install Heiken Ashi – HMA Deep Trend Retracement Forex Trading Strategy – MT5?</strong></h3>
<ul>
<li>Download Heiken Ashi – HMA Deep Trend Retracement Forex Trading Strategy – MT5.zip</li>
<li>*Copy mq5 and ex5 files to your Metatrader Directory / experts / indicators /</li>
<li>Copy tpl file (Template) to your Metatrader Directory / templates /</li>
<li>Start or restart your Metatrader Client</li>
<li>Select Chart and Timeframe where you want to test your forex strategy</li>
<li>Right click on your trading chart and hover on “Template”</li>
<li>Move right to select Heiken Ashi – HMA Deep Trend Retracement Forex Trading Strategy – MT5</li>
<li>You will see Heiken Ashi – HMA Deep Trend Retracement Forex Trading Strategy – MT5 is available on your Chart</li>
</ul>
<p><span><em>*Note: Not all forex strategies come with mq5/ex5 files. Some templates are already integrated with the MT5 Indicators from the MetaTrader Platform.</em></span></p>
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