HAS_Part_I(1).doc

Heiken_Ashi_Smoothed System

link to Heikin Ashi Smoothed System threads (with stars) at

forexfactory.com

http://www.forexfactory.com/forumdisplay.php?f=94

forex-tsd.com

http://www.forex-tsd.com/suggestions-trading-systems/6911-steinitz-method-revealed-here.html

Introduction

    My name is Don Steinitz. I am originally from California and moved to Las Vegas in 1984 leaving all behind for the pursuit of my number one interest “Blackjack”. I was able to make a very good living by counting cards and other methods to obtain an edge over the casinos. Yes I became well know in Nevada as expected but was never arrested or back roomed which to this day escapes me how I was so fortunate. I was also able to take advantage of tilted roulette wheels, sloppy dealers, slot machines that had some minor faults, biased bingo balls and edges in horseracing etc.

     I left the game after 23 years to play “No limit” poker since the edge in that game is large enough for the skillful player to make a nice income as well. I also get treated just the opposite as a professional blackjack player who is always looking behind his back and constantly getting escorted out of casinos. I have studied the stock and forex market for about 8 years now and put in about 11,000 hours in front of my computer looking at charts.

     This market is by far the toughest game to beat and I am determined to not give up until I find an edge that I can exploit to my advantage. So why would I share this information with you? Because I haven’t been successful prior to finding “Forex Factory” and this indicator. This website is dedicated to serious traders and I was able to stumble on what I believe is an indicator that presents a lot of potential. In the 8 years I have never seen such an accurate way to assess market movements and the ability to capitalize on the beginning of a trend.

THE INDICATORS USED

You need to load on your platform (3)three indicators

1. Heiken_Ashi_Smoothed
1a Input settings : 2-6-3-2
1b Colors : Red, blue, red, blue
1c. Width : 1,1,3,3
1d. Style : 0,0,0,0

2. 4 TF HAS Bar
2a Input settings : 2-6-3-2... 1
2b Colors : Red, blue, red, blue, red, blue, red, blue
2c Width : 0,0,0,0,0,0,0,0
2d Style : 0,0,0,0,0,0,0,0
2e Level style : Silver

3. 4 TF HAS Bar2
3a Input settings : 2-6-3-2… 0    Blue, Red, Black
3b Colors : Blue, red, blue, red, blue, red, blue, red (reverse sequence!!)
3c Width : 0,0,0,0,0,0,0,0
3d Style : 0,0,0,0,0,0,0,0
3e Level style : Silver

You need to set your price chart on "Line charts" (candlesticks will work too) but I prefer line charts since we are dealing with closing prices only and candles with clutter up the chart.

EXPLANATION OF THE INDICATORS

So now you have your charts set-up with the three (3) indicators and you have your pricing set to "Line charts". Let's continue......

1. On the top of the chart you will see the “HAS” indicator. There are only two colors that you will see red or blue. Red for down and blue for up. There is also another candle that you will see from time to time. It is a red body with a blue wick or blue body with a red wick. I’ll go into that later.

2. On the bottom of the chart you will see the “4TF HAS” indicator display four timeframes off to the right side of the indicator. If your platform is set to 5M you will see 5M, 15M, 30M & 1Hr. You can also confirm the TFs just over the indicator itself which helps if you can't see the right side of your screen for whatever reason.

3. On the  bottom of the chart we also have the “4TF HAS Bar2” which overlaps the other “4TF HAS Bar” indicator to enable a mixed color bar (bar with a dot in the middle) to display when they occur.

               THE RULES FOR ENTERING

Let’s take the 5M TF as our example :

1. Look at the lowest row which is the 5M TF. If the bar directly above the 5M bar is also blue, you take the trade long. The best time to enter on ANY TF is just after you see an opposite colored bar on as many TFs as possible. In this example, it’s best to enter after you have seen some red bars on the lowest TF. If you saw red bars on all 4 TFs just prior to entering long, this makes for a better trade. The reason for this is you want to enter at the beginning of a new move or time cycle. If you entered on a blue/blue candles (5M/15M) just after seeing just one row of red candles on the 5M TF, it is possible and highly likely that you are not taking the beginning of a New 5M trend. Either way the entry is ok to take. I mention this only to enlighten you as to what makes for a better entry which will produce more PIPS since you will have gotten in early.

2. Now you have entered the long trade and you are on the 5M/15M cycle. Your job now is to sit tight and do nothing until you see your first red candle on the 5M TF. Once this has occurred, you will be on alert status since the trade is starting to backfill. In other words, some possible profit taking has occurred. But do nothing. Two things will happen at this point forward.

2a. You will see some more red 5M bars, then as the market recovers, you will get into blue bars once again  or

2b. You will see more red 5M bars and then the 15M row will display its first red bar.

In the case of 2a, you just continue watching and do nothing.

In the case of 2b, you wait for the close of the 15M bar and then switch the TF of the MT4 platform to the next higher one. In this case, that would be the 15M. If after switching TFs to the 15M, you end up with a red bar on the lowest TF (15M) and a blue bar on the 30M TF, you are safe to continue the long trade. Remember we are always talking about the bar directly on top of the other bar.

3.  If after switching TFs to the 15M, you end up with a red bar on the lowest TF (15M) and red bar on the 30M TF, you exit immediately. Remember we always perform ALL functions with a close of bar.

4. So now assume we are clear to stay in on this long trade. So our job is to monitor the 15M/30M TF. Again we stay in the trade as long as the 15M stays blue. If it turns red, you perform the same function as before. Do nothing if the 15M is red and the 30M is blue. If the 15M and the 30M are both red, get out immediately (at the close).

5. Now this can go on for a long time. I will be attaching a trade on the forum that started with the 5M TF and continued to the 1hr/4hr. I just looked at the trade I will be posting that follows this word doc and I would still be in. Lot’s of PIPS were made by staying in and not exiting until the rules tell you to do so.

EXITS

1. I have always said that exits are the hardest part to any trading method. Not just this one but any method. The reason is it is hard to predict the beginning of a trend or the end of a trend. You can see clearly when you are somewhere in the middle.

2. I have two schools of thought that can be used mechanically. One exit is risky and one is less risky. With risk comes the potential to adjust how much profit you are trying to achieve. I will let the reader decide how much risk/reward they feel they want to manage.

3. When I talk about risk I am referring to how much potential profit one is willing to give back as a trade off for staying in the trade longer.

4. Exit rule #1 (more risky)

Exit on ANY TF when the lowest and next higher TF both show the opposite color from the original trade. When long, you would exit if the lowest TF and next higher TF both are red.

It should go without saying that you reverse whatever I am saying if you take the opposite trade direction.

5. Exit rule #2 (less risky)

Exit on ANY TF when the lowest TF bar changes to an opposite color from the original trade. When long, you would exit if the lowest TF bar is red, ignoring the upper TFs.

6. Keep in mind that if you exit on this less risky method, you can always get back in later after the lowest TF bar changes back to the original color based off of the original trade. I say this because you might have exited prematurely to avoid waiting too long for the riskier next higher TF bar to turn red.

I will go into another technique that will have its own thread. It will be based on what I have touched on here.

7. One of the reasons I have dedicated my time to this thread is for you the reader to help find ways to manage the exits to optimize the ability to keep those hard earned PIPS. I believe we can come up with a filter or something based on resistance or support that can help identify the tops and bottoms more efficiently.

EPILOGUE

1. That about sums up the strategy that you can use to make more money that you could have imagined. This can be your personal ATM machine. If you like what you have read, I would appreciate any and all feedback good or bad. Stay tuned for my next word doc about a style of trading that lets you enter at anytime once a trend has already been established.

Attached Files – 3 Indicators

Attached Files -Template

If I am busy, you guys can count on AceTrader to help out as he understands this method and is trading it live.

AceTrader :

1. The 4TF HAS Bar2 is used to show when MOMENTUM is changing. That
is what is seen when the bar is red & inside you see blue starting to build.
When I look for a trade direction, I start with 5M or 15M and if both are the
same color, I take notice. When I see 5M, 15M & 1H all in agreement, I'm
in. If you start on the 15M TF, and 30M & 1H are in agreement, that indicates
a strong move is building. The best setup is when the 15m, 30M, 1H & 4H
are all in agreement. All 4 agreeing would be the best setup.

2. Longer Time Frames........For me the longer TFs are very important in
that the more of them you have agreeing with your trade direction, the
better the trade should be. Example: If 15M, 30M, 1H, 4H & Daily are
all agreeing, the odds should be in your favor to win from the trades I've
done so far. Start now and check out the EUR/USD as it appears to be setting
up for a short trade (4/05/2007). On my 15M chart, the 15M & 30M are red. Now when the 1H hits red, I would enter and will if it’s not much later from now. Will the trade work? I don't know, but they have so far. Anything can change the outcome....news being one, but from a technical side, it should work.

Enter only if the candles are solid. If you’re going short and starting on the 5M
then the 15M, 30m & 1H should be the same solid red. If the 4H & the
Daily are red also, that’s even better. The more that are in color agreement,
the better. Once you are in the trade, you will notice that some of the TFs
will start to show the blue & that is indicating the MOMENTUM is changing,
but you get concerned if the candle becomes totally blue. If you enter short on the 15M with 30M 1H & 4H in agreement, then you notice the 15M showing
some blue, pay attention to the 30M, 1H & 4H HAS. If they are still red,
I would stay in and monitor the trade. If you are short and start to see more
blue candles ahead than you do red, that is a strong sign that trend has changed.

Exits for this method need to be designed to suit the individual trader’s
trading style and risk tolerance. When color changes against the trade on the
longer TFs, MOMENTUM is fading, so I get out & wait for another signal.

I hope this helps. This method is simple in design and use, but it requires
practice to learn the color patterns. Pull up a chart with the MTF HAS
indicator running and just notice the bars that have red & blue and how they
matched the price and you will see if the color change was just a bleep
or it really indicated a change in direction.

Pairs I trade : USD/JPY / GBP/USD / EUR/USD & EUR/JPY.

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Steinitz :

Acetrader is telling you how he trades. I don't agree with his explanation in total. It works for him and he is making money so I applaud him for that. Also, there is no one right answer. I will just explain how I see this method working from my point of view. It's only my opinion.

Here is my 2 cents and this is the last time I'll explain this.

You look for 2 like colored bars. You get in. Blue for long and red for short. If the trade is successful, you will start to see the third row from the bottom start to agree with the bottom two row colors. You now are in a good trade. If you wait for three rows to enter with your color, I feel you have waited too long. You don't want to get in too late.

Example: You are in the 5M/15M TFs and they’re both blue. The 30M is red. You go long and your trade is working so far. You will in time see the 30M turn from red to blue. Great! You are in a good trade. Now switch to the 15M/30M TF and they are blue. The 1hr is red. Now you see the 15M turn red. Do nothing. Now you start to see the 30M turn red. Stop what you are doing and now switch to the 1Hr TF.

If you have a 1hr red bar and a 4hr blue bar, you stay in. If you have a 4hr red TF, you exit.

Basically three rows of a bad color, you get out. This is another way of saying the same thing.

In essence you are staying in when longer TFs are showing the correct color of your trade.

The doc file on this thread is current! There are three methods to trade my system.

1. Following the set-ups on a lower TF and working upwards

2. Scalping by looking at where price penetrates the HAS candles and going with the main trend. Buying on dips and selling on rallies.

3. Scalping by using the MTF indicator (4TF HAS BAR) and buying on dips or selling on rallies by using the color bars.

If you have a red dot in the middle of a blue square = a BLUE square

If you have a blue dot in the middle of a red square = a RED square

The only difference is that this is a change in volatility or momentum,

a changing of the guards.

Question :I now understand about the mixed colored boxes and that I should stay out of the trade until they are solid.

Answer : No. Treat multi-colored bars as a solid bar. You can enter on one of those bars. It's actually a great bar to enter or exit on since it shows change in momentum!!!!!!

Those boxes are to identify the candles that have the wick one color and the body another. It is written up in my word doc. Basically it shows a slow down or change in momentum.

Red dot in center of blue square indicates a BLUE candle.

Blue dot in center of red square indicates a RED candle

Take a look at the candles to see those wicks.

By switching TFs you can see the way the HAS indicator looks when you switch TFs. You won't see anything except colored bars below but by switching TFs, you can now see angles of the trend and so much more by doing this. I would say the angles are the most important thing I look for.

I do have 2 questions at this moment though:

1.You begin with '' Look at the lowest row which is the 5M TF. If the bar directly above the 5M bar is also blue you take the trade long''

Meaning also blue with what? Refer to the doc attached. It has to have the 2 lowest TF same color to enter the trade? Please restate if you can the rules for entering.

The two lowest TFs must be lined up vertically as blue. 5M is blue and 15M (vertically on top) is also blue.

2. What is the use of the second indicator MTF HAS 2?

The second indicator is to display a multi colored bar. (wick/body different colors). Don't worry about that now. Go ahead and read the rest of the threads until you find discussion about that change in momentum bar.
 

I didn’t follow the other threads on heiken ashi method and started from this thread.
Should i begin to read the other threads on heiken ashi?
Yes

3/19/2007

Just posting an update on the same trade I used for this thread. Cable was going through red bars on the 1hr but the rules said to stay in and we are now once again sailing in blue seas (1hr bars)

1.9444 present price

I am going to post another example of how a trade started long on USD/CAD on a 30M TF and there was a crazy dip along the way and the rules kept you in this winning trade. There are times this would have been suicide to stay in but this example is for educational purposes only. The only hint that this trade could recover from the onset was that all ...