Heiken Ashi Smoothed 100 EMA Trend Bounce Forex Trading Strategy for MT5

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Heiken Ashi Smoothed 100 EMA Trend Bounce Forex Trading Strategy for MT5 - Buy Trade

One thing that traders should understand regarding the forex markets, or any type of tradeable instrument markets for that matter, is that the market can have fractal patterns. This means that the same characteristics that can develop on a longer term horizon can also develop on the shorter term.

One of these characteristics is that of the trends and price swings. Short-term trends and swings can form in a similar fashion as long-term trends do. Trend following traders trade on the confluence of such trends for better trade probabilities.

This trading strategy provides trades based on the same concept using the 100 EMA line and the Heiken Ashi Smoothed Indicator.

Heiken Ashi Smoothed Indicator

“Heiken Ashi” in Japanese translates to “average bars”. The Heiken Ashi Smoothed indicator is appropriately named as it technically is an average bar. In fact, it is an average representing the average movement of price.

The Heiken Ashi Smoothed indicator is a modification of the Heiken Ashi Candlestick. The Heiken Ashi Candlestick is a literal average bar in a sense. This is because it closely resembles a regular candlestick but only changes color whenever the direction of the short-term trend changes.

The Heiken Ashi Smoothed indicator on the other hand has a modified underlying computation that makes it resemble the movement of a moving average line. In fact, it behaves more closely to an Exponential Moving Average (EMA) line. It is very responsive to price movements, yet it is also smoothened out. The advantage of the Heiken Ashi Smoothed indicator on the other hand is that since it represented by bars that change color, the reversal points are more clearly defined and can therefore be used as a trend reversal signal.

This version of the Heiken Ashi Smoothed indicator plots lime green bars to indicate an uptrend, and dark orange bars to indicate a downtrend. However, we have modified it on the template used in this strategy for clearer visibility on a white background. This template plots green bars to indicate a bullish trend, and blue bars to indicate a bearish trend.

Heiken Ashi Smoothed Indicator

Although, the Heiken Ashi Smoothed signals can be very reliable, it is not perfect. It could still produce false signals during choppy markets. As such, it is best to align its trend reversal signals with a longer-term trend.

100 Exponential Moving Average

Moving averages are widely used by traders as a basis for identifying trend direction. However, there are certain moving average lines that are more popular than others. Some tend to work well as a short-term trend indicator, others for mid-term trends, while others still are best suited for long-term trends.

The 100-period Exponential Moving Average (EMA) line is a widely used moving average line. It tends to work well as a mid- to long-term trend indicator. As such, it is also best paired with another trend following indicator which could work as a mid-term trend signal.

Traders could identify trend direction based on the location of price action in relation to the 100 EMA line. The market has a bullish bias whenever price action is above the 100 EMA line and a bearish bias whenever price action is below the 100 EMA line.

The slope of the 100 EMA line would also typically follow the direction of the trend. The 100 EMA line slopes up in an uptrend, and down in a downtrend.

It also works well as a basis for a dynamic area of support or resistance. There are many instances where price would bounce off the 100 EMA line after retracing towards it.

100 Exponential Moving Average

Trading Strategy Concept

This trading strategy is a trend continuation trading strategy which trades on the confluence of a long-term trend and the short-term price swings moving in the direction of the trend. However, instead of trading any pullback, we will be looking for deep pullbacks. For this reason, we will be using the 100 EMA line to help us identify the trend direction, as well as the area of the pullback.

The trend direction is based on where price action generally is in relation to the 100 EMA line, as well as the direction of the slope of the 100 EMA line. Traders should also confirm the direction of the trend based on the price swing patterns of price action.

The pullbacks should be very close to the area of the 100 EMA line. Price should then show signs of price rejection as it nears the 100 EMA line.

The Heiken Ashi Smoothed bars are used as the trade entry signals. The trades are opened as soon as the color of the Heiken Ashi Smoothed bars indicate a trend direction which is in confluence with the 100 EMA trend direction.

Buy Trade Setup

Entry

  • Price action should be above the 100 EMA line.
  • The 100 EMA line should slope up.
  • Price should retrace towards the 100 EMA line causing the Heiken Ashi Smoothed indicator to temporarily change to blue.
  • Price should bounce off the area near the 100 EMA line causing the Heiken Ashi Smoothed bars to change back to green.
  • Enter a buy order as the Heiken Ashi Smoothed bars change to green.

Stop Loss

  • Set a stop loss on the support level below the entry candle.

Exit

  • Close the trade as soon as the Heiken Ashi Smoothed bars change back to blue.

Heiken Ashi Smoothed 100 EMA Trend Bounce Forex Trading Strategy for MT5 - Buy Trade

Sell Trade Setup

Entry

  • Price action should be below the 100 EMA line.
  • The 100 EMA line should slope down.
  • Price should retrace towards the 100 EMA line causing the Heiken Ashi Smoothed indicator to temporarily change to green.
  • Price should bounce off the area near the 100 EMA line causing the Heiken Ashi Smoothed bars to change back to blue.
  • Enter a sell order as the Heiken Ashi Smoothed bars change to blue.

Stop Loss

  • Set a stop loss on the resistance level above the entry candle.

Exit

  • Close the trade as soon as the Heiken Ashi Smoothed bars change back to green.

Heiken Ashi Smoothed 100 EMA Trend Bounce Forex Trading Strategy for MT5 - Sell Trade

Conclusion

This strategy could work well when used in the right type of trending market. These should be markets that are trending but with deep retracements. However, it could also produce false signals when traded in a choppy market condition. As such, it is still important for traders to identify trends based on price action. The indicators only serve as an indication and confirmation of the trend.


Forex Trading Strategies Installation Instructions

Heiken Ashi Smoothed 100 EMA Trend Bounce Forex Trading Strategy for MT5 is a combination of Metatrader 5 (MT5) indicator(s) and template.

The essence of this forex strategy is to transform the accumulated history data and trading signals.

Heiken Ashi Smoothed 100 EMA Trend Bounce Forex Trading Strategy for MT5 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 assume further price movement and adjust this strategy accordingly.

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How to install Heiken Ashi Smoothed 100 EMA Trend Bounce Forex Trading Strategy for MT5?

  • Download Heiken Ashi Smoothed 100 EMA Trend Bounce Forex Trading Strategy for MT5.zip
  • *Copy mq5 and ex5 files to your Metatrader Directory / experts / indicators /
  • Copy tpl file (Template) to your Metatrader Directory / templates /
  • Start or restart your Metatrader Client
  • Select Chart and Timeframe where you want to test your forex strategy
  • Right click on your trading chart and hover on “Template”
  • Move right to select Heiken Ashi Smoothed 100 EMA Trend Bounce Forex Trading Strategy for MT5
  • You will see Heiken Ashi Smoothed 100 EMA Trend Bounce Forex Trading Strategy for MT5 is available on your Chart

*Note: Not all forex strategies come with mq5/ex5 files. Some templates are already integrated with the MT5 Indicators from the MetaTrader Platform.

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