Heikin Ashi Smoothed Buy and Sell Strategy

This strategy is based on a single indicator - Smoothed Heikin-Ashi, to implement simple trend following buy and sell operations. It identifies trend direction via Smoothed Heikin-Ashi indicator and determines entry…

Pine ScriptTrend following EMA Heikin Ashi

Author: ChaoZhang
Complexity: Starter · 47 lines
Parameters: 1
Backtest bar: 2d · swing
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

Strategy Logic

The strategy calculates moving average of open, high, low and close prices to construct Smoothed Heikin-Ashi.

Buy condition: Current bar's close > previous bar's close, previous bar's close > 2 bars ago's close, latest 3 bars are bullish.

Sell condition: Current bar's close < previous bar's close, previous bar's close < 2 bars ago's close, latest 3 bars are bearish.

Both buy and sell conditions require the latest signal to be 0 or opposite signal, to avoid consecutive same direction trading.

Advantage Analysis

Simple logic with single indicator
Utilize Heikin-Ashi's trend following ability
Avoid missing trends or trading reversely via candlestick patterns
Reduce unnecessary trades by filtering duplicate signals

Risk Analysis

Heikin-Ashi has lagging effect, may miss trend turning points
Only consider latest 3 bars, lack of long term trend judgment
No stop loss set, risks enlarging losses
Ignore overall market conditions, vulnerable to systematic risks

Improvements can be made by combining other indicators for long term trend, optimizing stop loss strategy, paying attention to overall market etc.

Optimization Directions

Add other indicators to determine long term trend
Optimize stop loss such as trailing stop or percentage based stop loss
Consider overall market index to avoid trading in range bound market
Optimize parameters like moving average period
Add volume indicators for ensuring trading volume support

Summary

This strategy utilizes Heikin-Ashi's trend following ability and combines candlestick patterns to determine entry timing, while controlling trade frequency via filtering duplicate signals. The logic is simple and easy to implement. But it can be enhanced to be more robust by using multiple indicators combo, optimizing stop loss, considering overall market conditions etc.

Parameters

Name	Default	What it controls
v_input_1	65	Moving Average Period?

Source Pine Script

/*backtest
start: 2022-09-30 00:00:00
end: 2023-10-06 00:00:00
period: 2d
basePeriod: 1d
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//Masoud Abdoli
//Heikin Ashi Smoothed Buy & Sell Strategy Rev.4
//Date: 01-Oct-2021
//@version=4

strategy(title="Abdoli's Heikin Ashi Smoothed Buy & Sell Strategy Rev.4", shorttitle="Heikin-Ashi Smoothed Rev.4", overlay=true,
 initial_capital=1000, default_qty_type=strategy.percent_of_equity, default_qty_value=100)

MaPeriod = input (title="Moving Average Period?", type=input.integer, defval=65, minval=5, maxval=100, step=5)

maOpen  = ema(open , MaPeriod)
maHigh  = ema(high , MaPeriod)
maLow   = ema(low  , MaPeriod)
maClose = ema(close, MaPeriod)

haClose = (maOpen+maHigh+maLow+maClose)/4
haOpen = 0.0
haOpen:= na(haOpen[1]) ? (maOpen[1]+maClose[1])/2 : (haOpen[1]+haClose[1])/2
haHigh = max(maHigh, max(haClose, haOpen))
haLow  = min(maLow , max(haClose, haOpen))

plotcandle(haOpen, haHigh, haLow, haClose, title="heikin-Ashi smoothed", color=haOpen>haClose ? color.orange : color.blue)

B0 = haClose    - haOpen
B1 = haClose[1] - haOpen[1]
B2 = haClose[2] - haOpen[2]
BuyCondition = B0 > 0.0 and B1 > 0.0 and B2 > 0.0 and haClose > haClose[1] and haClose[1] > haClose[2]
SellCondition= B0 < 0.0 and B1 < 0.0 and B2 < 0.0 and haClose < haClose[1] and haClose[1] < haClose[2]

last_signal = 0
Buy_final  = BuyCondition  and (nz(last_signal[1]) == 0 or nz(last_signal[1]) ==-1)
Sell_final = SellCondition and (nz(last_signal[1]) == 0 or nz(last_signal[1]) == 1)
last_signal := Buy_final ? 1 : Sell_final ? -1 : last_signal[1]

plotshape(Buy_final , style=shape.labelup  , location=location.belowbar, color=color.blue, title="Buy label" , text="BUY" , textcolor=color.white)
plotshape(Sell_final, style=shape.labeldown, location=location.abovebar, color=color.red , title="Sell label", text="SELL", textcolor=color.white)

strategy.entry("Buy", strategy.long, when=Buy_final)
strategy.close("Buy", when=Sell_final)

Published by ChaoZhang on the FMZ strategy square · last modified 2023-10-07. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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