Here’s another one from the mind of Sylvain Vervoot. In “Trading With The Heikin-Ashi Candlestick Oscillator” (Stocks and Commodities, December 2008), Vervoot describes a methodolgy for creating a “visual tool to complement (Heikin-Ashi) candlesticks, helping you enter and exit trades, resulting in higher profits per trade.” In a nutshell, the Heikin-Ashi Candlestick Oscillator (HACO) uses the triple exponential moving average (TEMA) to filter out some of the whipsaws inherent in basic Heikin-Ashi candlesticks. There’s a fair bit more to it than that but you can explore the article on your own. The indicator itself is just a binary “Buy/Sell” signal as shown by the alternating red and green colors. I’ve circled the places in the traditional Heikin-Ashi chart where a trend change was indicated but the HACO correctly filtered out the signal. The HACO can be used on any symbol and timeframe. As with the Vervoot Crossover, the HACO can easily be turned into a strategy which is also pictured below. In this instance, a two day five minute chart of the ES was used resulting in a proft of $2612 on one contract. The up/down trend moving average periods were set to 27 within the HACO. Full results are here. UPDATE: The HACO strategies have been uploaded to “Door Number Three” of the Gold Donor area of the forum. (I’ll send out a donor update on Sunday as usual but if you can’t wait, just shoot me an email)
Heikin-Ashi Candlestick Oscillator
Very interesting! Can’t wait to see it in this week’s dump — I’ve become a big fan of HA for 2 main reasons a) it doesn’t jump around like regular candles, and b) trends are SO much clearer to me using HA than anything else. In the first case, when doing discresionary trading, the lag in HA candle development keeps me from bailing as the price flails around tick-to-tick.
Eric,
I am simply amazed by your work. I got the strategy part of TOS working as well. I had no idea it could be used like that. Great work in explaining it a bit!! I am a bit of a coder myself so it came fairly easy once I knew it existed.
Do you trade very much and use these indicators in your trading or are you in the process of testing different strategies before risking much? Have a great night. Gary
Agreed – nice work. Also, squeeze can help to further clarify the buy/sell marks within HACO (i.e. wait out the buy signal from HACO if squeeze is showing consolidation).
Check out NQ on Tuesday @ 5 min to with both Squeeze & HACO. Easy signals.
Eric,
Will this also be as effective on daily stock charts?
Lee,
The design is such that timeframe doesn’t really matter. You will need to tune the settings to your particular timeframe and trading vehicle. If you have access, Vervoot’s original article explains his methodology fully.
Eric
Where is the article and how to I gain access?
See the blog post above. It was published in Stocks and Commodities, December 2008: http://www.traders.com/Documentation/FEEDbk_docs/2008/12/Verv.html
Thanks Eric. Just read the entire article and HACO looks great. So when we donate we get access to the TOS HACO code?
Lee,
Yes, all the studies are available to the Gold subscribers.
Eric
Eric,
How do we determine what the up trend/down trend inputs should be? I primarily trade daily charts. For your 2 day chart you set them as 27/27. Why was that your setting? Should they be different for daily charts?
Lee,
The 27/27 was based on a rough trial and error optimization. There really are no “Correct” settings. One should experiment with different values depending on your trading vehicle and timeframe to achieve the best results.
Eric
Should both numbers be the same?
Not necessarily. In general, the smaller the number the more agile the HACO but also the more susceptible to false signals.
Eric
Eric,
Like other Heikin-Ashi Candlestick Oscillators I know there are substantial delays in reporting – do you know what the lag time is on the study you scripted?
Thanks in advance,
Iso
Eric,
Donation made…
Thanks in advance,
Iso
Have you guys been using this study with good results? I will be signing up tonight.
Thanks
Chris