The strategy that I will share today is a trend-following strategy. This means that we will trade in the direction of the trend only.
If the price is in an uptrend, we will look for buying opportunities only. And, if the price is in a downtrend, then we will look for selling opportunities.
The super trend is a trend-following indicator that is very similar to the moving averages. It helps in identifying the short-term trend of the market.
The super trend is calculated using ATR and a multiplier.
We can identify the trend based on the colour and placement of the super trend indicator.
If the super trend is below the price and it’s green in colour, this signifies that the price is in an uptrend.
On the other hand, if the super trend is trading above the price and its colour is red, then this signifies that the price is in a downtrend.
A lot of traders use the super trend indicator as an entry signal. For instance, when the super trend turns green from red, a buy signal is generated. So they buy at this point and they keep their stop loss below the super trend.
As the price moves up, the super trend will also move higher. They will trail their stop loss along with the super trend.
Eventually, when the super trend turns red from green, they will exit at that candle, and enter a sell trade.
The Heikin Ashi candles are different from the regular candlestick charts.
The main difference is that the Heikin Ashi charts show continuity in trend and reduce the noise on the charts.
Other than that, the candlesticks and Heikin Ashi are quite similar.
Now let us understand the exact rules of the system.
In this trading system, we are using only two indicators. Both of them are super trend indicators with different settings.
On the first super trend, we will set the period to 14 and keep the multiplier to 2. And, on the second super trend, we will keep the period to 21 and the multiplier to 1.
This gives us a short-term and long-term super trend.
And of course, we will choose the Heikin Ashi charts instead of candlestick charts.