Trading Strategies Revealed – “Heiken Ashi & EMA” review
Trend following trading strategy “Heiken Ashi & EMA” is designed mainly for Forex and can be used on all currency pairs on any time-frame.
How to trade “Heiken Ashi & EMA”
A trader should place a buy order when 9 exponential moving average cross 18 exponential moving average up, bearish heiken ashi candle must touch the ema line(s), next bullish candle should close above the fast ema. A sell order should be placed when 9 exponential moving average cross 18 exponential moving average down, bullish heiken ashi candle must touch the ema line(s), next bullish candle should close above the fast ema.
To run a back-test we have coded a complete Heiken Ashi & EMA trading strategy as a MetaTrader 4 Expert Advisor. During preliminary analysis we have identified that the best time frame for Heiken Ashi & EMA trading strategy is 1 hour (H1).
We have run a back-test of Heiken Ashi & EMA trading strategy. For our test as a trade exit rule we have used a Trailing Stop of 30 pips which is launched after a trade has started and is modified each new 1 pip of profit. From our point of view, such approach allows to maximize profit and minimize drawdown.
We have run the test for 2009.01.01-2020.11.24 using Every Tick modelling on EURUSD-H1, using 1:10 leverage, without reinvestment, assuming spread equals 10 ticks. These are the main parameters of Heiken Ashi & EMA trading strategy performance at its non-optimized state:
# of trades
Trading data analysis
After running the initial test of a simple non-filtered strategy we perform a trading data analysis that allows to identify possible filters to use to make the strategy more profitable reducing the drawdown simultaneously.
The following charts may give some possible insights on which filters to apply (time sessions, day of week limitation, trend strength threshold, overbought/oversold conditions, volatility range) to turn this strategy profitable should you decide to use this strategy in your investment portfolio:
Heiken Ashi & EMA can be used with other indicators to filter out losing trades and make entry signals more accurate. After analyzing trading data we have found the following insights which have helped us to make the Heiken Ashi & EMA trading strategy profitable reducing it’s drawdown in 10 times:
Trades that were opened at a too low and at a too high values of ADX have appeared to bring more losses when trading “Heiken Ashi & EMA” trading strategy during 2009 – 2020. ADX shows the power of the current trend. It is more reasonable to take trades at the trend start. (ROI increase 2.5% -> 8.1%, Drawdown reduction 29.7% -> 9.58%)
The majority of buy trades that were opened at a too low value of Stochastic and the majority of sell trades that were opened at a too high value of Stochastic were losing when trading “Heiken Ashi & EMA” trading strategy during 2009 – 2020. It is risky to take trades in the overbought and oversold zones. (ROI increase 2.5% -> 6.2%, Drawdown reduction 29.7% -> 9.91%)
Most of the trades that were opened at a too high and a too low values of RSI were losing when trading “Heiken Ashi & EMA” trading strategy during 2009 – 2020. RSI measures the magnitude of most recent price changes to evaluate the overbought and oversold zones. (ROI increase 2.5% -> 7.1%, Drawdown reduction 29.7% -> 6.44%)
We have analyzed data received from a test of Heiken Ashi & EMA trading strategy during 2009 — 2020 years and applied some filters such as ADX, RSI and Stochastic. As a result, the profitability of the strategy has increased from 2.5% up to 6.6% and it’s drawdown has reduced from 29.7% to 2.93% using leverage 1:10.
Reducing the drawdown has allowed us to increase the leverage that can be used while trading this strategy up to 1:50, which in turn, has resulted in annualized ROI increase up to 325.88%!
Reducing the drawdown has also allowed us to use risk based lot calculation. Below you can see the back-test results using $10,000 initial balance and 5% risk per trade:
# of trades
Analyze your trading strategy!
If you have a trading strategy that you want to analyze, optimize and increase its profitability (or even turn it from losing into a profitable Forex trading strategy) – feel free to contact us! Our trading data analysis team will respond to you within 24 hours clarifying all the details needed.
Our company specializes on automated trading systems and trading indicators development for the most popular trading platforms, such as MetaTrader 4/5, NinjaTrader 7/8, TradingView, TradeStation and cTrader.
If you need your own automated trading software designed based on your individual requirements, make a request for a free consultation with our team of professional programmers and find out the cost and terms of your project development.
MT4 Heiken Ashi + EMA Indicator is an indicator based on the Heiken Ashi & EMA trend following strategy, which is used by traders to get confirmation of the trend continuation. The indicator searches for signals by strategy on all selected assets / timeframes and visualises the results obtained in the dashboard, which allows to cover the entire market at once and not miss a single signal.
Disclaimer: Hypothetical or Simulated performance results have certain limitations, unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity.
Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.
Past performance is not necessarily indicative of future results. The customer is responsible for using the product at his or her own risk and “Nordman Algorithms” is not responsible for any possible losses caused by use of the product, including but not limited to losses.
Trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.
Hypothetical or Simulated performance results have certain limitations, unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.
Please note, that testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.
Nordman Algorithms is not liable for any risk that you face using a ready-made indicator from Nordman Algorithms indicators base. Please, use the software on your own responsibility. All the software pieces are coded in accordance with some common known trading concepts and Nordman Algorithms does not guarantee accuracy or performance of the software entry setups.
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