Heiken-Ashi candles were developed in Japan — the name translates roughly as "average steps". Instead of showing every candle tick individually, HA candles mathematically smooth the price action into a sequence of clear green and red bars. Traders have used them for decades as a visual noise filter: when the candles flip colour, that's a trend-change signal.
Smoothed Heiken Ashi (SHA for short) takes it one step further. Instead of just applying the HA calculation, the strategy smooths the OHLC data twice — once before the HA calculation, once after. That amplifies the noise filter and reduces the whipsaws that plain HA produces in choppy markets.
Today Smoothed Heiken Ashi goes live as the latest strategy in the Backtesting Arena. Here's an honest introduction — what it is, when it works, and when it doesn't.
First: What are Heiken-Ashi candles?
A normal candle shows Open, High, Low, Close (OHLC) of a period. Heiken-Ashi computes "artificial" candles from those, showing more trend and less noise:
| Value | Calculation |
|---|---|
haClose | (Open + High + Low + Close) / 4 — average of all four |
haOpen | (previous haOpen + previous haClose) / 2 — recursive from last HA candle |
haHigh | max(High, haOpen, haClose) |
haLow | min(Low, haOpen, haClose) |
The trick: haOpen is recursive — it depends on the previous HA candle. That acts like a built-in smoothing filter. The result: long runs of green candles in uptrends, long runs of red candles in downtrends, and rare colour flips at turning points.
The extra smoothing — the "Smoothed" layer
Plain Heiken-Ashi is good, but in choppy markets the colour still flips a few times more than you'd like. The Smoothed variant adds another smoothing layer before and after the HA calculation:
- Pre-smoothing: each of the four OHLC series (open, high, low, close) is independently smoothed with a moving average of length
smoothLength(default 10). - HA calculation on the smoothed series.
- Post-smoothing:
haOpenandhaCloseare smoothed again with lengthafterSmoothLength(default 10).
You can pick the MA type: SMA (simple, most lagging), EMA (default — a bit faster), WMA (emphasises recent bars).
Trade logic
Very simple: we trade the colour flip of the final smoothed HA candle.
- BUY — final
haClose > haOpenon the current bar AND was not strictly green on the previous bar (red/doji → green). - SELL — final
haClose < haOpenon the current bar AND was not strictly red on the previous bar (green/doji → red).
No additional indicators, no volatility filter at the core. Just the colour.
What SHA is good for
Clear trending markets. SHA shines when an asset has a clean trend. The double smoothing ensures the strategy enters early enough and — more importantly — stays in during the trend. Small pullbacks don't flip the colour of the smoothed HA candle.
Weekly candles and higher. On 1W, SHA produces few but clearly-drawn signals. The built-in lag hurts less on higher timeframes because trends run longer.
Multi-asset. Heiken-Ashi logic is asset-class agnostic. A colour-flip approach works structurally the same on crypto, stocks, ETFs, commodities and forex.
Simplicity. Three parameters: two smoothing lengths plus MA type. Hard to overfit.
What SHA is NOT good for
Lagging by design. This is the core tradeoff. Two smoothing layers filter a lot of noise, but they also produce late entries on fast trend reversals. If a market runs from 70k to 100k in four weeks, SHA might only flip green at 90k. On the upside, you'll then sit in until 120k because a single pullback won't flip the colour.
Long warmup. smoothLength + afterSmoothLength + ~10 bars — with default 10/10 that's ~30 bars of dead time before the first signal can fire. On weekly candles that's over 6 months of ramp-up. Short backtest periods (e.g. "last 1 year on 1W") may show few to zero trades — that's normal, not a bug.
Sideways markets. Despite the double smoothing, genuinely choppy phases still produce colour flips. The strategy has no volatility or trend-strength filter — it only sees the colour.
If you want more trades. If your profile demands many short trades, SHA isn't the right tool. You can shorten the smoothing lengths or switch to daily, but then you lose the main advantage (whipsaw reduction).
Concrete defaults and why
| Parameter | Default | Reasoning |
|---|---|---|
| Pre-Smooth Length | 10 | Classic setup from the original publications |
| Post-Smooth Length | 10 | Symmetric default — both stages weighted equally |
| MA type | EMA | Reacts faster than SMA, smooths cleaner than WMA |
You can adjust all three via the backtest form. Shorter lengths = more trades but more whipsaws. Longer lengths = fewer trades but later entries. The SMA variant is the laziest, WMA the most reactive.
Where the strategy is available
Pro+ in the Backtesting Arena, available now:
- Backtest page — all 5 asset classes (Crypto, Stocks, ETF, Commodities, Forex)
- Bulk Backtest (Admin) — comparison runs across multiple assets
- Custom Report Wizard — self-service strategy reports
- Live Alerts — email alerts on BUY/SELL triggers (Pro+)
- Signal traffic light — live status per pair (Pro+)
Free has access to 3 basic strategies (RSI/SMA, Golden Cross, RSI OB/OS). Pro+ unlocks SHA and all other Pro strategies, plus filter combinations and trailing-stop modifiers.
A transparent closing note
Smoothed Heiken Ashi is a classic trend-following strategy with an honest identity: it filters a lot of noise but arrives late. That's not a bug, that's the point.
What you should test yourself: try SHA on weekly candles across multiple market phases — bull (2020-2021), bear (2022), sideways (mid 2023), recovery (2024-2025). Performance varies noticeably. Also compare the three MA types — SMA, EMA and WMA can produce quite different trade lists on the same pair.
Try the strategy:
→ tradingstrategies.work/dashboard/crypto
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