Trading strategy: Open Trade HA-BB

Description

The Open Trade Heikin Ashi – Bollinger Bands (HA-BB) is a pure day trading strategy. The strategy is applied in a 3-minute time frame. It is also possible to explore the strategy in a 1- or 2- minute time frame. This strategy is proposed by the "Trade Academy" in Germany. It combines the popular, trend-indicating Heikin Ashi candles with Bollinger bands.


  
Suitable for : Market indices
Instruments : Futures and CFDs
Trading type : Day trading
Trading tempo : Up to 5 trades per ½ day
The strategy : Video
Using NanoTrader Full : Manual or fully automated

 

The strategy in detail

When to open a position?

A position is opened at the market price immediately after the first Heikin Ashi candle closes outside the Bollinger band. This Heikin Ashi candle should not have a bottom shadow (in case of a long signal) or a top shadow (in case of a short sell signal).

Open Trade HA-BB is used for trading market indices during the first half of the day from 8h00 to 11h00. Multiple signals are likely during this time interval. Between 11h00 and 8h00 the next day all signals are blocked. These are the green zones in the chart background. The parameters can be adapted in the strategy in the platform to allow signals on the US market indices in the afternoon.

 

In this screenshot the first signal is a short sell signal. The second signal, just after 9h30, is a buy signal. Both trades were profitable. It is rare that the market makes two big swings in opposite directions during the first market hours.


 

In this screenshot there are three short sell signals. The first is positive, the second is negative and the third is positive.

When to close a position?

In order to always have a stop in place the strategy uses the low minus 1 tick (in case of a long position) or the high plus 1 tick (in case of a short position) of a 20-period price channel. Should this stop fall within the current Bollinger bands then the Bollinger bands minus or plus 1 tick are used as stop. This stop is really only there for protection purposes as it is unlikely to be hit. Indeed, in the majority of cases the position is closed at the market price after the first Heikin Ashi candle has closed within the Bollinger bands.

Attention. Given that most of the time the stop tracks the Bollinger band, it is often the case that the stop becomes bigger (i.e. the potential loss the trader is willing to absorb increases) before going down with the Bollinger band. Accepting an increasing stop is fairly rare in trading. In this case, because the stop is really an emergency stop only and the positions are usually closed by the Heikin Ashi crossing back into the Bollinger band, it is possibly acceptable. You decide.

 

In the below screenshot the first signal is a buy signal. The stop -red line- tracks the Bollinger band and goes down, increasing the risk. This is very rare in a trading strategy.

 

Conclusion

The Open Trade HA-BB strategy suggested by the German Trade Academy is typical of strategies based on high and low levels after market open. However, whereas most open trade strategies are limited to one or two signals this strategy can have multiple signals every day. By combining two popular and relevant technical analysis components –Bollinger bands and Heikin Ashi- Trade Academy assures traders are interested in exploring this strategy.

Practical implementation

In NanoTrader Full follow these steps:
  • Choose the instrument you wish to trade.

  • Open a chart with the template study "WHS Open Trade HA-BB".

  • Semi-automated trading? Simply activate the TradeGuard+AutoOrder or the AutoOrder function.