MTF Heiken Ashi

You might have heard of a famous charting style called Heiken Ashi. It is well known for smoothing the trend by filtering out the noise. However, this article will discuss a modified form of Heiken Ashi.

What is the MTF Heiken Ashi indicator?

You might have seen Heiken Ashi candles that reveal a smooth trend on the chart. However, the MTF Heiken Ashi does the same differently. It plots the Heiken Ashi candles in the bottom window of the chart.

The indicator comes with limited settings. You can choose the color schemes. Secondly, you can choose the timeframe. By default, the timeframe is 240 minutes (4 hours). The indicator’s timeframe has nothing to do with the price chart’s timeframe. The indicator plots a Heiken Ashi chart in the bottom window. Here’s what it looks like:

MTF Heiken Ashi indicator
MTF Heiken Ashi indicator

MTF Heiken Ashi Strategy

Since MTF Heiken Ashi is a trend indicator, you can use it to grasp the trend continuation or trend reversal. So, your strategy is based on whether you want to hold your current positions or open new positions.

MTF Heiken Ashi candles appear like a histogram. So it becomes easier for you to spot tops and bottoms. As soon as you see a histogram retreating from the top and you see the tip of the MTF Heiken Ashi candle in red color, it’s a sign of bearish reversal.

Similarly, if you see the histogram rising from the bottom and the tip of the Heiken Ashi candle is blue, it shows a bullish reversal.

MTF Heiken Ashi buy signal

  • Wait for the histogram to start rising from the bottom.
  • You could enter the long position when blue colored Heiken Ashi candle appears.
  • You could place the stop-loss around the recent swing low or exit in loss when the buy signal appears.
  • You could place the take profit at the next resistance level or exit when the sell signal appears.
MTF Heiken Ashi buy signal
MTF Heiken Ashi buy signal

MTF Heiken Ashi sell signal

  • Wait for the histogram to fall from the peak.
  • You could enter the short position when red colored Heiken Ashi candle appears.
  • You could place the stop-loss around the recent swing high or exit in loss when the sell signal appears.
  • You could place the take profit at the next support level or exit when the buy signal appears.
MTF Heiken Ashi sell signal
MTF Heiken Ashi sell signal

MTF Heiken Ashi pros and cons

Pros

  • The indicator can be used to identify trend reversal.
  • The indicator helps reduce noise.
  • The indicator can be combined with any other indicator to create a system.

Cons

  • The indicator is lagging.
  • The conflict between the indicator’s timeframe and the price chart may create confusion.

Conclusion

MTF Heiken Ashi indicator is considered an improved version of the original Heiken Ashi indicator. Although it has many advantages, you should not try it directly on your real account. Never risk blindly. Consider backtesting and forward testing on a forex demo account before going with a live account.

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