Long-Only Trend Following with Smoothed Heikin-Ashi Candles

Summary

This long-only trend-following method smooths OHLC prices with an EMA, derives modified Heikin-Ashi candles from those values, and smooths the resulting candle series a second time. A change in the smoothed candle color supplies the entry or exit signal: the strategy opens a long position after a red-to-green change and closes it after a green-to-red change. The stated position size is the full account equity. Parameters include separate lengths for the initial EMA and second smoothing stage. Published settings show a daily BTC/USDT futures backtest spanning late 2019 to late 2024, but no performance results are supplied.

Smoothing is intended to reduce noisy signals, with the trade-off that signals can lag. The document notes exposure to drawdowns at reversals, false changes in sideways markets, and risk from full-equity sizing. Although it describes the system as robust, it provides no statistical evidence for that characterization; testing across timeframes and risk controls would be needed to assess its behavior.

Key ideas

• The method applies EMA smoothing to prices before and after calculating modified Heikin-Ashi candles.
• A red-to-green candle change opens a long position, while a green-to-red change closes it.
• The strategy uses full account equity for position sizing.
• Smoothing can reduce noise but may delay entries and exits.
• The published backtest period is broad, but no performance statistics are reported.

Tags

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