Testing: Weekly Heikin-Ashi-Bollinger Stock Trading System

Testing, inviting comments

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Picture by Denis Fadeev

This timing system for stock trading/investing is under test. It is something I came up with. It consists of 3 very popular elements Heikin Ashi candles, Bollinger Bands and an exponential moving average line. What is not common is the way they are combined.

  1. Bollinger Bands set up here is using 13 period setting. It is meant to used on weekly chart only to show price ‘overbought/oversold’ over 13 weeks or one quarter. Bollinger Bands usually employ 20 period.
  2. The middle line feature in the Bollinger Band has been removed so that only the extremes are observed.
  3. I have encountered many kinds of systems using Heikin Ashi candles but all of these were designed for scalping, short-term trading.
  4. I designed this system for ‘lazy’ way of visually selecting stocks for further inspection. It is designed to show stocks on weekly chart that are displaying ‘overbought/oversold’ in conjunction with change in colour i.e. trend reversal.
  5. The exponential moving average line painted in thick red uses a 3-period setting with 2 displacement. It is meant for trend-following i.e. buy/sell with-the-trend when price is sitting on the ma line or as a confirmation for reversal trigger i.e. when price is at overbought/oversold of Bollinger Bands – Heikin Ashi changes colour – price cuts moving average (see examples of previous buy and sell signals indicated in chart).

    Weekly Heikin Ashi Bollinger Band Stock Timing Strategy A: Buy/Sell signals for trend changes

    Weekly Heikin Ashi Bollinger Band Stock Timing Strategy

  6. Middle of trend trades can be done in line with direction of trend. On a lower time frame chart such as daily time frame, execute with-the-trend trade when price is closes to the red moving average line.

    Weekly Heikin Ashi Bollinger Band Stock Timing Strategy B

    Weekly Heikin Ashi Bollinger Band Stock Timing Strategy B

As a note, since this chart is meant to be used on weekly chart only, other time frames may show opposite signals. This is a common problem when dealing trading indicators on multiple time frames. In addition, Heikin Ashi may change colours several times until the week is over so mid-week signals may not be reliable. This colour change is most likely to happen when 1. there is high volatility such as price spikes and or 2. near/at turning points.

I am inviting comment and feedback from anyone. If there is such a strategy elsewhere, please inform me by providing a link. I have not seen anyone use such a combination. This is convergent evolution at it’s best and I must say that great minds think alike.

 

For those who are keen, this is another setup using Bollinger Bands that I shared some time back. It is available as an MT4 template.


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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.   Soh's Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX.   Disclaimer notice: "I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."
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