Trending markets are extremely difficult to predict. Trending markets should be the simplest type of market for traders to trade. This is because momentum is usually on your side in a trending market. Price usually moves in one direction. Traders should be able to quickly determine which direction the market is most likely to move in. This gives them an answer to a question with only two options: up or down, buy or sell.
However, even while trading in a trending market, many traders fail. It is rare that they get the trend direction wrong because most traders get it correctly. However, many traders fail to correctly answer the second question, which is when they should enter a transaction. Trading is about more than just deciding whether to buy or sell. It is also about timing. Even if a trader correctly predicts the trend direction, if the trade is entered at or near the end of the trend, the transaction will result in a loss.
So, when should we consider making a trade? Although there is no definitive answer, a decent middle ground would be when the market has retraced but also shown signs of resuming the trend direction. Consider glancing at a chart and seeing the price heading upward. You already know you want to buy, but you should also wait for a discount.
Heiken Ashi Moving Average
The HAMA indicator (Heiken Ashi Moving Average) is a trend following indicator that combines the Heiken Ashi Candlesticks and moving averages.
The Heiken Ashi Candlesticks are an unique form of charting in which price candles are plotted based on their average movements rather than their exact open and close values. The candle’s wicks are formed by retaining the highs and lows. This enables traders to successfully detect swing highs and swing lows. However, the open and close of each candle is determined by the average price movement. This results in candlesticks that change color only when the price momentum has shifted.
The Heiken Ashi Moving Average, also known as the Heiken Ashi Smoothed, is a variant of the Heiken Ashi Candlesticks, which is connected to the Exponential Moving Average. It does not move like price action, but rather like a moving average. It also plots wicked bars. These bars and wicks, however, do not represent price action. These bars closely follow price action, much like a good moving average.
It also only changes color when the trend has clearly reversed. Blue bars represent a bullish trend, while red bars represent a bearish trend.
HAMA is an extremely dependable trend tracking indicator. It consistently shows trend direction and produces good trend reversal indications based on the shifting hue of its bars.
ASC Trend
The ASC Trend indicator is an unique momentum indicator that serves as a short-term trend reversal signal.
The ASC Trend indicator plots arrows that point in the direction of the trend reversal.
This indicator can be used by traders as a trend reversal entry trigger. Traders can confirm a trade setup and enter a trade using the arrows drawn by the ASC Trend indicator when it is in sync with another longer-term trend indicator.
Trading Strategy
Moving Average Heiken Ashi The ASC Trend Forex Trading Technique is a straightforward trend-following strategy that makes use of the HAMA indicator’s dependability in determining trend direction as well as the ASC Trend indicator’s accuracy in finding momentum-based entry signals.
The hue of the HAMA bars, as well as their interaction with the 50-period Exponential Moving Average (EMA) line, are used to determine trend direction in this technique. The placement of the HAMA bars in reference to the 50 EMA line is used to identify trends.
Then, once we’ve identified the trend direction, we wait for price to retrace back to the HAMA bars. The entry signal is then identified based on the arrow indicated by the ASC Trend indicator.
Indicators:
Preferred Time Frames: 15-minute, 30-minute, 1-hour and 4-hour charts
Currency Pairs: FX majors, minors and crosses
Trading Sessions: Tokyo, London and New York sessions
Buy Trade Setup
Entry
- The HAMA bars should be above the 50 EMA line.
- The HAMA bars should be blue.
- Price should retrace towards the HAMA bars.
- The ASC Trend indicator should plot an arrow pointing up.
- Enter a buy order on the confirmation of these conditions.
Stop Loss
- Set the stop loss on the support below the entry candle.
Exit
- Close the trade as soon as the ASC Trend indicator plots an arrow pointing down.
Sell Trade Setup
Entry
- The HAMA bars should be below the 50 EMA line.
- The HAMA bars should be red.
- Price should retrace towards the HAMA bars.
- The ASC Trend indicator should plot an arrow pointing down.
- Enter a sell order on the confirmation of these conditions.
Stop Loss
- Set the stop loss on the resistance above the entry candle.
Exit
- Close the trade as soon as the ASC Trend indicator plots an arrow pointing up.
Conclusion
This trading method is an effective trend following strategy that can create significant yields with a low risk-reward ratio.
HAMA bars typically follow the trend and are unaffected by erroneous price surges. This allows traders to keep transactions open for much longer until the end of a trend. The open-ended nature of the trade settings provided by this method allows traders to earn more whenever trends stay longer.