Heikin Ashi Reversal Signal

Entry Logic

• Exact Entry Trigger: Look for a small-bodied Heikin Ashi candle (like a doji) with long upper and lower wicks after a strong trend. This signals trend exhaustion. Enter on the next candle if it reverses direction.
• Confirmation: The reversal candle should be strong and decisive.
• Timeframe: Any.
• Market Condition: End of a trend.

Exit Logic

• Profit Targets: Target the next support/resistance level.

Stop Loss Structure

• Hard Stop: Place stop beyond the high/low of the doji candle.

Risk Management Framework

• Risk Per Trade: 0.75% of account capital.
• R:R Requirement: Minimum 2:1.

Position Sizing Model

• Sizing Approach: Fixed fractional.

Trade Filtering

• Market Conditions to Avoid: In the middle of a strong trend.

Context Framework

• Higher TF Alignment: The reversal should occur at a higher timeframe support or resistance level.

Trade Management Rules

• Take Profits: This is a reversal trade, not a new trend.

Time Rules

• Optimal Window: Near market turning points.

Setup Classification

• A+ Setup: A Heikin Ashi doji that forms at a major weekly resistance level after a long uptrend.

Market Selection Criteria

• Instruments: Any liquid instrument.

Statistical Edge Metrics

• Win Rate: 55-65%.
• Profit Factor: 1.6.
• Expectancy: 0.3R.

Failure Conditions

• Strategy Fails: If the doji is just a brief pause before the trend continues.

Psychological Rules

• Discipline: Wait for the confirmation of the reversal candle before entering.

Advanced Components

• Filters: Look for divergence on an oscillator like RSI to confirm the reversal signal.

Location

• Strongest: At the exhaustion point of a clear trend.