Binary Options Heiken-Ashi Strategy
A binary options Heiken-Ashi strategy can help identify trends and inform trading decisions. Heiken-Ashi tools essentially reduce noise and average out price movements of standard candlestick charts.
This guide to trading binary options using Heiken-Ashi candles unpacks example analysis, trading tactics, strategy development, and the best supporting brokers for UK investors. Find out how to read Heiken-Ashi charts and make winning trading decisions.
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Heiken-Ashi (HA) is a candlestick-based trading tool that utilises charts to present pricing data. The system dates back as far as the 1700s when the concept was developed by Japanese rice merchant, Munehisa Homma.
In Japan, the definition of Heiken is ’average’ and the word Ashi means ’bar’. So, Heiken-Ashi means ‘average bar’, echoed by the strategy using average price data over a set period, such as 60 minutes, 60 days, 90 days, or even 6 months.
The Heiken-Ashi approach shares some characteristics with standard candlestick charts but there are some key differences in the way that the values are determined.
How It Works
Traditional candlesticks consist of the pure numerical values at the opening, closing, high and low price points within a period. In contrast, the Heiken-Ashi binary options strategy incorporates information from the previous period. This gives the chart a smoother appearance, making it easier to spot trends and reversals.
While the binary options Heiken-Ashi system is often called a type of chart, it also doubles as a technical indicator. This is because it considers a series of real price levels before displaying the information using the HA formulae.
To get to grips with the trading tool, it is important to understand how the chart is generated. There are four calculations for the open, close, high, and low of each candle:
- Open: The midpoint of the previous candle’s body
- Close: The average of the actual high, low, open and close prices for the current period
- High: The greatest of the current period’s high, open and close points
- Low: The lowest of the current period’s low, open and close points
How To Read A Heiken-Ashi Candle
The binary options Heiken-Ashi strategy can help you determine when to enter or exit a position.
Small fluctuations are suppressed by the candlesticks as the indicator smooths out noise using average pricing. This means that any trends you do identify are likely to be stronger and have more momentum.
The lack of a shadow or wick on one side can also signify yet more trend strength. However, this is only the case if the colour of the candle matches the perceived trend.
- Bearish – A strong downtrend signal is exposed by several consecutive red candlesticks without upper wicks. Here, binary options traders may want to open a down/lower trade.
- Bullish – A strong indication of an uptrend is the occurrence of consecutive green candlesticks without lower wicks. Here, binary options traders may want to open an up/higher trade.
- Ascending, Descending & Symmetrical Triangles – An upward trend is likely to persist if the indicator breaks above the boundary of an ascending or symmetrical triangle, as shown below. Alternatively, if candlesticks fall below the bottom line of a descending triangle, the bearish trend is likely to continue.
Pros Of Trading Binary Options Using Heiken-Ashi
- The indicator is less likely to display false breakouts
- Heiken-Ashi amends the appearance of standard candlestick charts to show the strength of a trend. For beginners, the system is ideal as it removes excess market noise that can clutter analysis and charting zones
- Trend direction and reversals are easier to spot given the averaging of price data. This means signals are clearer and data tends to be more reliable helping to execute binary options positions
- The popularity of the binary options Heiken-Ashi strategy means that the majority of brokers for UK investors now integrate the charting system within their live day trading platforms
Cons Of Trading Binary Options Using Heiken-Ashi
- Price averaging produces some lag, so it is not best suited to short-term contracts
- Heiken-Ashi charts do not always show gaps which can be a key part of trading systems
- The lack of actual open and close values can inhibit some approaches, especially with volatile assets like cryptos such as Ripple (XRP)
How To Add Heiken-Ashi To Your Trading Platform
You can use the binary options Heiken-Ashi strategy on most popular trading platforms via their indicator or chart menu. This includes MetaTrader 4 (MT4), MetaTrader 5 (MT5), TradingView, and NinjaTrader.
Many binary options brokers and groups also offer this as standard within their proprietary terminals tools.
Here is a step-by-step guide to using the system as an indicator tool on MT4:
- Download the MT4 platform or open the WebTrader terminal
- Download the Heiken-Ashi indicator
- Search for an asset in the navigation bar
- Select ‘Insert’ from the top toolbar
- Select ‘Indicators’ from the dropdown menu
- Select ‘Heiken-Ashi’ from the available indicators
To amend or customise the indicator, right-click on the chart and select ‘properties’. Note that the only variables that can be changed within the Heiken-Ashi settings are the candlestick colours, as per the image below.
Contact your binary options broker if you have any issues, such as an indicator not working on their supported platforms, or for news on the latest updates.
Comparing Heiken-Ashi Binary Options Brokers
Certain considerations are key when selecting a broker with which to execute the binary options Heiken-Ashi strategy:
The best binary options brokers that support the Heiken-Ashi system will offer platforms with a wealth of other analysis tools.
The HA indicator is best used in conjunction with other alerts and signals to better determine the strength and direction of a price movement. You will likely want to look out for integrated indicators without the need for multiple downloads or third-party plugin requirements.
Consider other tools also, such as profit calculators and copy trading.
Paper trading profiles are a great way to practise reading and applying a binary options Heiken-Ashi strategy to charts and graphs before risking personal funds.
Spend some time monitoring the candlesticks to learn when to enter and exit a binary options contract. The binary options best demo accounts will utilise live market conditions, so you can practise completely risk-free whilst reviewing pricing in real time.
Having access to educational content and resources is ideal when executing a new investing technique. Being able to refer to e-books, YouTube video content and PDF tutorials with free download capability can improve your confidence and ensure the HA indicator is understood and being applied correctly.
The top binary options brokers offer high payouts of 90%+ on popular assets such as major forex pairs. It’s also worth noting that volatile markets, such as cryptos, typically come with lower payouts.
Use With Other Indicators
As the Heiken-Ashi is a trend indicator, you can use it alongside other indicators to support your binary options trading decisions. These could include the Parabolic SAR and moving averages.
For trend reversals, it is often beneficial to use an alternative indicator that can support price direction change confirmation, such as the Relative Strength Index (RSI) or the moving average convergence/divergence (MACD) indicator.
Keep Charts Simple
It can often seem like the best idea to load a trading platform with indicators, alerts and various graphical instruments. However, this can hinder your binary options trading experience and prevent you from deciphering critical information and quickly responding to market activity.
Stick to a clean chart and use visually appealing colour settings to ensure you can rapidly obtain the relevant information when building your binary options Heiken-Ashi strategy.
Price Fluctuations 101
It is important to remember that time lags can cause delays between signals and actual pricing. As the indicator can smooth out price fluctuations, it can make trends easier to spot. With this, when a Heiken-Ashi binary signal occurs, the actual price may be quite different from what the latest close is showing.
Understand Your Asset
As much as the binary options Heiken-Ashi strategy is a useful tool for live binary options trading, it is important to understand the price dynamics of the asset or market before beginning. You cannot be solely reliant on a tool or alert to do the hard work for you.
Having a grasp of typical patterns using historical price data will strengthen your binary options Heiken-Ashi strategy.
Bottom Line On Trading Binary Options Using Heiken-Ashi
In summary, the binary options Heiken-Ashi strategy is a useful tool for identifying market trends, building upon the advantages of traditional candlestick charts. The system uses averaging calculations to provide a better perspective of the direction in which an asset’s value will move. However, you will get the most out of the binary options Heiken-Ashi strategy when using it alongside other indicators, such as moving averages and Bollinger Bands.
Check out our list of the top binary options brokers that support Heiken-Ashi charts and indicators in 2023.
Can A Binary Options Heiken-Ashi Strategy Be Used On All Trading Platforms?
A binary options Heiken-Ashi strategy can be utilised across many industry-established platforms and proprietary software. It is an indicator available for download on MT4, MT5 and TradingView, to name but a few.
What Is A Binary Options Heiken-Ashi Strategy Used For?
Traders can use a binary options Heiken-Ashi strategy to identify price trends. The indicator looks for the emergence of new trends or the reversal of existing ones. You can set custom alerts to use with other price direction signals to create a well-rounded technical analysis approach.
Can I Trade All Assets With A Binary Options Heiken-Ashi Strategy?
A binary options Heiken-Ashi strategy can be applied to the majority of markets. So, whether you are looking to speculate on the price of cotton, Bitcoin (BTC) or Apple stocks, you can make it work for your goals.
It is worth noting, the system is renowned for not being the best suited to more volatile assets, given its characteristics of smoothing out price fluctuations.
What Do The Binary Options Heiken-Ashi Candlesticks Show?
Binary options Heiken-Ashi candlestick patterns help investors identify significant market trends and provide contract entry and exit points. The wide data set also means false signals are screened more effectively vs standard candlesticks. Use our guide above to find out more about binary options Heiken-Ashi trading systems and tactics.
What Are The Benefits Of A Binary Options Heiken-Ashi Strategy?
The binary options Heiken-Ashi strategy is an ideal analysis feature for beginners as it removes excess market noise and smooths out any unusual volatility. HA charts and indicators are also available at most of the best binary options brokers.