Introduction to the Heiken Ashi Arrows Indicator
One way to avoid noise is to not mind the subtle shifts in price movements but rather focus on the changes in the average price movements. This would seem impossible when looking at a naked chart. However, various technical indicators can help traders identify average price movements.
“Heiken Ashi” translates to “average bars”. The Heiken Ashi Arrows indicator is one of those indicators that can help traders identify trends based on average price movements.
What is the Heiken Ashi Arrows Indicator?
The Heiken Ashi Arrows indicator is a momentum-based short-term trend following technical indicator.
It is an indicator which provides short-term trend or momentum reversal signals which traders can use to enter and exit trades. It indicates such momentum reversals by plotting arrows pointing the direction of the momentum reversal. Aside from plotting arrows, this indicator also provides alerts and notifications whenever it detects a momentum reversal coming from various tradeable instruments or currency pairs.
How the Heiken Ashi Arrows Indicator Works?
The Heiken Ashi Arrows detects momentum reversal signals coming from an underlying Heiken Ashi Candlestick indicator.
Below is a chart comparing a basic Heiken Ashi Candlesticks chart and the signals provided by the Heiken Ashi Arrows indicator. The green bars represent a bullish Heiken Ashi Candlestick, while red bars represent a bearish Heiken Ashi Candlestick. Notice how the Heiken Ashi Arrows indicator plots an arrow whenever the Heiken Ashi Candlestick changes color.
How to use the Heiken Ashi Arrows Indicator for MT4
The Heiken Ashi Arrows indicator is basically a momentum reversal signal indicator which is based on the Heiken Ashi Candlesticks.
On first glance the signals it produces might seem to be very erratic and unreliable. However, this indicator should not be used as a standalone trading strategy. It should be used as an entry signal which is in confluence with other trade setups.
One good way to trade using the Heiken Ashi Arrows indicator is to trade its signals in confluence with the direction of the trend. This indicator would produce signals pointing against the trend during pullbacks due to its short-term characteristics. We avoid trading those signals but instead wait for another signal that would be in confluence with the direction of the trend.
Buy Trade Setup
When to Enter?
Identify a market that is in an uptrend and trade buy trades exclusively on such market. Open a buy order as soon as the Heiken Ashi Arrows indicator plots an arrow pointing up. Set the stop loss on the support below the entry candle.
When to Exit?
Close the trade as soon as the Heiken Ashi Arrows indicator plots and arrow pointing down.
Sell Trade Setup
When to Enter?
Identify a market that is in a downtrend and trade sell trades exclusively on such market. Open a sell order as soon as the Heiken Ashi Arrows indicator plots an arrow pointing down. Set the stop loss on the resistance above the entry candle.
When to Exit?
Close the trade as soon as the Heiken Ashi Arrows indicator plots and arrow pointing up.
Conclusion
The Heiken Ashi Arrows indicator is basically just a modification of the standard Heiken Ashi Candlesticks. Traders can opt to use one or the other. The advantage of using the Heiken Ashi Arrows is that you could still use a standard Japanese candlesticks chart and observe price action and various candlestick patterns, whereas using the Heiken Ashi Candlesticks indicator would make it impossible to observe for Japanese candlestick patterns.
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