Binary Options Heiken Ashi Strategy
When trading binary options, there are hundreds of strategies, indicators and graphs at the disposal of investors. The Heiken Ashi candlestick is one of the most simple and well-supported tools. Investors can use it to develop a more informed trading strategy than standard candlesticks. By the end of this binary options Heiken Ashi strategy guide, we will have explained how this candlestick works with examples of charts and trades informed by it. We will also list the pros and cons of trading binary options using a Heiken Ashi-based strategy.
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About Heiken Ashi
Heiken Ashi candles are an alternative charting candlestick that investors use to aid the analysis of assets. A Japanese rice merchant named Munehisa Homma is credited with creating the chart in the 18th century. The trader specialized in the newly created rice futures market and used the Heiken Ashi chart and strategy to analyze trading prices. In the current day, these calculations can be automated and displayed in real-time by even simple binary options trading platforms.
The Heiken Ashi candle uses average price values from two standard time periods to help eliminate false breakout signals and enhance overall signal development. A green or red Heiken Ashi candle is a stronger alert to a trader than a standard candle. It suggests a more substantial trend due to the longer-term data used to update the live chart.
Trading Binary Options With Heiken Ashi Charts
Heiken Ashi candles can cut through market noise and dispel false signals. As a result, this candlestick can help binary options traders make more accurate trend predictions in the medium to long term. In addition, breakouts indicated by the candles have more data, collected over an extended period. This means signals will often provide investors with more robust trends on which to base their binary options Heiken Ashi strategy.
However, due to the medium to long-term focus of the candles, short-term price actions are often missed with Heiken Ashi candlesticks. In addition, as binary options are primarily short-term trading instruments, Heiken Ashi strategies can be a poor fit for aspiring traders.
It is also worth noting that a binary options Heiken Ashi strategy and candles do not typically display signals such as price gaps and daily closing prices.
What Heiken Ashi Signals Tell Binary Options Traders
Heiken Ashi signals are similar to the signals shown by standard candlesticks but infer a stronger trend. Key insights:
- A long, filled green candle with no or a small shadow (line below the candle) shows a strong upward trend in the price of an asset
- A long, filled red candle with no or a small shadow (line above the candle) shows a strong downward trend in the price of an asset
- Weaker, but still significant trends are indicated by candles with a large shadow and a shorter body
- A candle with a short body and short shadow indicates little or no trend and signals a sideways price movement
- Trend reversals are indicated by candles with long shadows both above and below the body of the candle, and short bodies
Binary Options Heiken Ashi Strategy Examples
To help explain how Heiken Ashi candles are used as part of a trading system, here are three examples of binary options Heiken Ashi strategies:
Trader A is a keen forex trader and has been watching the chart of USD/JPY. They believe the strong downtrend that started at 19:00 will reverse at some point but are wary of false breakout signals from standard candlestick analysis. To reduce the risk of this, they use Heiken Ashi views.
At 19:16, Trader A spots a candle with a short body and long upper and lower shadows and knows that a reversal will likely follow. Therefore, they opt for a five-minute binary options strategy, entering a long contract with a current price of 147.370.
Trader B specializes in commodities and has their eye on the cotton market. Their fundamental analysis has concluded that the asset is currently overpriced and will fall soon.
However, like Trader A, they are worried that standard candlesticks will show false breakouts and lead to them entering a short binary options contract too soon. As a result, they are using Heiken Ashi charts to reduce this chance.
At 11:56, Trader B notices a long, filled red candle appears, signalling a solid downward trend. As a result, they open a short binary options contract with the price at 74.15, using a 60-minute strategy.
Trader C is a crypto enthusiast and wants to use a binary options Heiken Ashi strategy to speculate on XRP/USD.
They foresee a short-term sideways market but want to ensure that small price movements are not the start of a reversal. Trader C uses Heiken Ashi candles to give themselves the best chance of an accurate prediction.
At 01:51, Trader C notices that the strong downtrend signals have stopped and been replaced by a candle with a short body and short shadow. This signals a sideways price movement.
As a result, they use a boundary binary options variant to bet that the price of XRP/USD will be within a 20-unit range of its current value of 0.4706 (above 0.4696 but below 0.4716) after five minutes.
Availability & Support
Heiken Ashi candles are available on almost all binary options trading platforms. From the most basic lite proprietary platforms to the best third-party solutions like MT4, MT5 and NinjaTrader, there is no need to download any plugins to use a binary options Heiken Ashi strategy. In fact, our experts found zero binary options platforms that didn’t support Heiken Ashi charts and graphs.
Pros Of Binary Options Heiken Ashi Strategies
- Universal – Whether you are trading Cotton futures, spot BTC or leveraged forex, a binary options Heiken Ashi strategy can help eliminate false signals.
- Well-supported – While some strategies require advanced trading platforms like MT4 or MT5 to implement, Heiken Ashi candles are available on almost all binary options trading platforms.
- Great signal screen – The broader range of data means that false breakout symbols are screened more effectively than with standard candlesticks.
- Simple – A binary options Heiken Ashi strategy is one of the most simple technical systems to understand and act on for beginners.
- Good in combination with indicators – Heiken Ashi candles combine well with other indicators for more complex trading signals.
Cons Of Binary Options Heiken Ashi Strategies
- Ill-suited to short-term trades – Heiken Ashi candles can miss short-term momentum movements due to their data range.
- Lack of detail – The flip side of the simplicity of Heiken Ashi charts is their lack of detail.
- Price data is lost – Due to the averaging effect of Heiken Ashi candles, price data is lost, including closing prices.
- Gaps not shown – A disadvantage of using the binary options Heiken Ashi strategy instead of standard candles is that price gaps are not shown. These gaps can be important for making price predictions.
Binary Options Heiken Ashi Strategies
We have put together some suggestions for binary options Heiken Ashi strategies and tactics:
Strong Trends
Heiken Ashi charts are excellent at identifying strong directional trends and filtering out false breakout signals. Binary options investors can identify strong trends by an entire candle with no or little shadow. The appearance of several of these candlesticks together can suggest that the price direction will continue.
To take advantage of this signal, traders can open a short to medium-term binary options contract. You can use anything from a two-minute binary options strategy to a 60 minutes contract.
Reversals
Trading a reversal is slightly more complex than a strong trend signal strategy. Trend reversals are signalled by a candle with a short body and long shadows on either side of the body. However, binary options traders should use these candles along with an analysis of the historical data to spot whether this is more likely to be a reversal or a sideways price action.
Reversals can take some time to complete, so this binary options Heiken Ashi strategy best suits a medium-term contract.
Sideways Market
Using a sideways market binary options Heiken Ashi strategy is the most complex of the three suggestions here. First, traders must use a binary options provider that supports the boundary variant.
In addition, sideways market signals are the most likely to be false or confused with a reversal. As a result, this binary options Heiken Ashi strategy can be used in conjunction with other tools such as Bollinger Bands and Relative Strength Index (RSI) indicators.
Traders using boundary binary options to speculate on sideways markets (i.e. a lack of volatility) should look at short to medium-term contract lengths. It is up to each trader to balance the best returns with a solid chance of winning the bet.
How To Set Up A Binary Options Heiken Ashi Strategy
Our experts have put together a step-by-step guide to help you get started trading binary options with Heiken Ashi candles. Due to the simplicity of the setup and availability of the candle type, this strategy should be accessible to all binary options traders.
Broker Sign-in
The first step is to log in to a binary options broker. You can also experiment with Heiken Ashi strategies in a demo account before staking real funds, so log in to a paper trading account if you have one. Importantly, all major proprietary and third-party binary options platforms support Heiken Ashi candles.
Changing The Candles
The next step is to change the standard candlesticks to Heiken Ashi candles. On proprietary platforms, there is usually a small button or group of icons with a candle on it. Click this button and select “Heiken Ashi” from the menu.
Note, if it is not working you can contact your binary options broker’s customer support team for guidance on platform functionality.
With third-party trading platforms like MT4 and MT5, this process is still simple but slightly different. For example, to add Heiken Ashi candles to MT4, go to the “Insert” menu at the top of their screen and select “Indicators”. Then, select “custom” and “Heiken Ashi”.
Monitor The Markets
Now that you have set up your candles, it is time to monitor the markets for signals. Once you spot a signal, you can either jump into a trade or wait for the next candle to confirm your theory. However, wait too long and the potential binary options trading opportunity might have been and gone.
Make A Trade
When you’re ready to make a trade, select your stake, contract length and, if relevant, variant. Most binary options Heiken Ashi strategies use short to medium-term contract lengths, so you can start with a two to five-minute strategy for most positions. They may not be as effective with systems that span 60 days or 6 months.
Final Word On Binary Options Heiken Ashi Strategies
Heiken Ashi charts and graphs are handy trading tools with lots of potential for trend analysis and eliminating false signals. This indicator is simple to set up, well-supported across binary options trading platforms and easy to understand. However, due to its lack of data, this indicator is best utilized along with other chart or graph tools. In addition, this indicator’s longer time frame means there may be better strategies than trading binary options with Heiken Ashi candles.
FAQs
Is Heiken Ashi The Best Strategy For Binary Options Trading?
Heiken Ashi candles are great for reading trends and eliminating false breakout signals. However, they could be better at displaying the short-term price momentum that many binary options traders use for a one or two-minute binary options strategy, for example.
Can I Combine Heiken Ashi With Other Binary Options Indicators?
Heiken Ashi candles integrate well with additional indicators such as Bollinger Bands or Volume-Weighted Average Price (VWAP) and Relative Strength Index (RSI) indicators.
Can I Use A Binary Options Heiken Ashi Strategy In MT4?
Some binary options providers use third-party platforms such as MetaTrader 4 (MT4) or MetaTrader 5 (MT5). Heiken Ashi candles are available to use on such platforms, as well as almost all brokers’ proprietary terminals and apps.
Is A Binary Options Heiken Ashi Strategy Hard To Use?
Heiken Ashi is one of the most straightforward binary options indicators available. Therefore, there is no need for complex trading courses or books to understand its signals and use cases.
Does A Binary Options Heiken Strategy Ashi Use Historical Data?
Heiken Ashi uses two-period averages to form its candlesticks, giving a more long-term view but also using live data. As a result, the binary options Heiken Ashi strategy is popular with traders.