Education
Heikin-Ashi + DMI + Pitchfork = A super easy trend system!
I have been trading this system recently and have been surprised at how easy it is to trade with a predominant trend. Using a unique 3-indicator system composed of Heikin-Ashi + the DMI + Pitchforks allow a trader to reduce chart noise and stay in a trade until the trend has exhausted itself. The basic rules of the system include waiting for buy signals on both the Heikin-Ashi and the DMI and then exiting a trade when both the DMI and Heikin-Ashi have given sell signals. The Pitchforks serve as hidden support and resistance and help the trader with placing stop losses based on swing points of the candles and the next nearest pitchfork support lines to minimize chances of stops being triggered. The Pitchforks are also useful for identifying potential reversal zones to enter and exit trades if a trader notices particular pitchfork lines support price more significantly than others. Extra layers of support/resistance confluence can be added with Fibonacci Retracements and Extensions/Projections at these potential price reversal zones. I personally do this myself but the chart does get a bit cluttered and was hard to show clear entrance/exits with them included on here in this photo.
I personally use this on shorter time frames (3min) and it is just as accurate, however, TradingView requires a minimum 15-min resolution to post an idea. I imagine, as with all trades, the longer the time frame the stronger the signals, and the shorter the choppier the trades could get with being stopped out. While I have not tested this extensively, reversing this system for a short does work as well (data not shown on this chart). I have not tested longs or shorts on futures or Forex, so YRMV, and I would suggest testing extensively before implementing on those markets.
Illustration of this system can be seen on FFUV on the 15min chart. It shows two trades, first with a trade of 51% profit and a second of 24%. Average return over two days was 37.5% profit.
Pros of this system:
Very easy to use to identify and trade in the direction of the predominant market trends
Makes it easy to identify Elliot Waves, XABCD, or ABCD market geometry setups due to the nature of the Heikin-Ashi Candles
Ample noise reduction for "nervous" or new traders to make sure they catch the most of a trade trend with easily identifiable entrances and exits
PDT traders may find this system on longer periods/for swings more agreeable than day trading since it minimizes number of trades and maximizes potential return
Traders with full time jobs may find this more agreeable as it is a "set-it and forget it" type of system where they can schedule alerts/exits on the DMI cross over threshold to focus on other important things
Cons of this system:
Trading during ranged markets can lead to being stopped out or quickly lost profits (additional period length or higher level can minimize this risk, see below)
Missing out on "perfect" entry and exits due to combining two lagging indicators
Heikin-Ashi does not represent "true" chart price and it is recommended to add the real stock price on the chart somehow or have broker open with true price to not miss a potential entrance/exit if price reverses quickly/strongly
System Settings:
Heikin-Ashi = Standard
DMI length = 5 period, 20 level (can adjust both period and level higher or lower depending on needs of the trader. Longer = less profit but stronger signals; shorter = max potential profit but more frequent trading/more chop).
Pitchfork = Schiff (change angle more vertical to Modified Schiff or Original as trend goes outside of Schiff Fork if needed. I prefer to just clone the Schiff and move it higher or lower above the main fork since I trade corrections).
I personally use this on shorter time frames (3min) and it is just as accurate, however, TradingView requires a minimum 15-min resolution to post an idea. I imagine, as with all trades, the longer the time frame the stronger the signals, and the shorter the choppier the trades could get with being stopped out. While I have not tested this extensively, reversing this system for a short does work as well (data not shown on this chart). I have not tested longs or shorts on futures or Forex, so YRMV, and I would suggest testing extensively before implementing on those markets.
Illustration of this system can be seen on FFUV on the 15min chart. It shows two trades, first with a trade of 51% profit and a second of 24%. Average return over two days was 37.5% profit.
Pros of this system:
Very easy to use to identify and trade in the direction of the predominant market trends
Makes it easy to identify Elliot Waves, XABCD, or ABCD market geometry setups due to the nature of the Heikin-Ashi Candles
Ample noise reduction for "nervous" or new traders to make sure they catch the most of a trade trend with easily identifiable entrances and exits
PDT traders may find this system on longer periods/for swings more agreeable than day trading since it minimizes number of trades and maximizes potential return
Traders with full time jobs may find this more agreeable as it is a "set-it and forget it" type of system where they can schedule alerts/exits on the DMI cross over threshold to focus on other important things
Cons of this system:
Trading during ranged markets can lead to being stopped out or quickly lost profits (additional period length or higher level can minimize this risk, see below)
Missing out on "perfect" entry and exits due to combining two lagging indicators
Heikin-Ashi does not represent "true" chart price and it is recommended to add the real stock price on the chart somehow or have broker open with true price to not miss a potential entrance/exit if price reverses quickly/strongly
System Settings:
Heikin-Ashi = Standard
DMI length = 5 period, 20 level (can adjust both period and level higher or lower depending on needs of the trader. Longer = less profit but stronger signals; shorter = max potential profit but more frequent trading/more chop).
Pitchfork = Schiff (change angle more vertical to Modified Schiff or Original as trend goes outside of Schiff Fork if needed. I prefer to just clone the Schiff and move it higher or lower above the main fork since I trade corrections).
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.