Testing: Weekly Heikin-Ashi-Bollinger Stock Trading System
Testing, inviting comments
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.
- 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.
- The middle line feature in the Bollinger Band has been removed so that only the extremes are observed.
- I have encountered many kinds of systems using Heikin Ashi candles but all of these were designed for scalping, short-term trading.
- 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.
- 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).
- 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.
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.