Long-Only Trend Following with Double-Smoothed Heiken Ashi

Summary

This long-only method builds modified Heiken Ashi candles by first applying an EMA to open, high, low, and close, then smoothing the resulting candle open and close with another EMA. A color change from bearish to bullish triggers a long entry; a change back closes it. The signals are intended to reduce short-term noise and follow sustained upward moves. The stated position sizing uses a percentage of account equity, with the default set to all available equity.

The document includes adjustable smoothing lengths and a one-month BTC futures backtest configuration, but no performance results, costs, or benchmark. Double smoothing can delay entries and exits, while color reversals in sideways markets may cause repeated trades. The strategy does not take short positions and has no explicit stop-loss or profit-taking rule in the shown implementation, so its equity-based sizing alone does not define a loss limit.

Key ideas

• The method applies EMA smoothing to prices before constructing modified Heiken Ashi candles, then smooths candle values again.
• A bullish candle color change opens a long position, and a bearish color change closes it.
• The approach is long-only and uses account-equity-based sizing, with the stated default allocating all available equity.
• Smoothing may delay signals, and sideways markets can produce false reversals and repeated trades.
• The published BTC futures setup has no reported performance results or explicit stop-loss rule in the implementation.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.