Heikin-Ashi Candlestick Oscillator

Posted by on Apr 1, 2009 in Analysis, Indicator, Trend | 35 comments

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

Heikin-Ashi Candlestick Oscillator

35 Comments

  1. 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.

  2. 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

  3. 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.

    • What specific type of squeeze are you talking about? Bollinger band squeeze or some other type?

  4. 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?

  5. 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

  6. 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

  7. 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

  8. Eric,

    Donation made…

    Thanks in advance,
    Iso

  9. Have you guys been using this study with good results? I will be signing up tonight.

    Thanks
    Chris

  10. I set the parameter to 35 and is working well on short timeframes for my ES trades

    Thanks

  11. What levels of memberships are there? or is the PRO the top and only membership level?

    Also with this HACO, I scalp the ES on a 400 tick chart. Can you suggest settings on this script? Thanks.

    After I donate, how do I get access to all the awesome studies?

    BIG THANKS !!!!!!

    • Just the Pro. The HACO was designed by Vervoort for daily charts…
      Studies come via email or through the forum Pro area.
      -Eric

  12. Eric,

    Is there any way to amend the strategy to include an ATR stop for both back-testing and active trading?

    Dan

    • Dan,
      Yes I believe that would be possible though it would take a bit of work to get the two working together.
      Eric

      • Eric,

        Thanks for getting back to me so quickly. Is this something you would be willing to put together? And if so, how much do you typically charge for something like that?

        I have been getting good results using the HACO signal on an intermediate time frame with hourly charts and upping the periods for the HACO, but I’d love to be able to backtest the two together to get a little more confident in it and make it more robust.

        Thanks,

        Dan

  13. Hey,

    could you please tell me were it’s possible to read this article? I have no subscription to stocks and commodities and do not want to subscribe because of this one article…

    thanks,
    Daniel

    • I don’t think it is available anywhere on the net except by subscription.
      Eric

  14. Daniel,

    You can purchase the individual articles….

    http://traderscom.stores.yahoo.net/stcov265trwi.html

    • Tank you very much!

  15. Hi, I just joined today. Great work you are doing! I’m curious to backtest this, how can I make it into a strategy?

    • Chris,
      Take a look at my article on the Vervoort Crossover and how I turned that into a strategy. It has the basic roadmap.
      Eric

  16. This looks spectacular,

    By strategy do you mean fully automated? how would you go about doing that? or something that you could follow as very strong high probability rules?

    • I mean strategy in the thinkorswim thinkScript sense. I have a few tutorials on the site discussing strategies.

  17. hi, how can i get this study please?

    • The HACO is part of the Pro membership package.

  18. Would it be possible to use thinkscripter to develop an add/bar/chart spot in Active Trader that would clock the ratio of a running total of the 5 Bid vs 5 Ask totals so that one could visually see the running, real-time total ratio of those every changing totals on the screen somewhere? Or would that be a fundamental change to the TOS software and better requested of those programmers for some later improvement?

    Thanks.

    • That type of feature must be incorporated at the core application level by ToS. ThinkScript can only be used for chart indicators, scans, and custom columns.
      -Eric

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