Let’s say you are in a bullish trend with white candles all the way. The trend can terminate on a day when a black candle appears, which can only happen if the haClose is lower than the haOpen on that day. Since you already have your fixed haOpen for tomorrow, you can easily calculate the value of the close that will cause the haClose for tomorrow to be less than that haOpen. Granted that this value of the actual close will vary with the actual high or low of tomorrow’s trading somewhat, but you do have a handle on when to get out of the long position you may have with the existing bullish pattern. And as the actual high-low data comes in the early morning tomorrow, you would have a fairly accurate value of the price which can prompt a bearish candle. This value, let’s call it the ‘critical’ value, can be the exit point for your long position. And in the event of a sufficiently large black bearish candle appearing as the trading progresses during the day, you may even opt to go short in your stock. Once having gone short, you should then be alert to the possibility of a white candle appearing to act as an exit cue on the short position, and even create a long position if the bullish candle is sufficiently long enough to prompt you to do that.
So far, so good, but what should the threshold value for the price that would act as the trigger for exiting or going long or short? This is where the Fibonacci ‘golden’ ratio comes in handy. The magical ratio, so often seen in nature’s design, seems to work its magic into price movements too. The ratio that you can incorporate to calculate the trigger for going long (or short) is the value 0.618, as in higher (or lower) percentage terms of the critical value you have calculated for a bullish or bearish trend to appear.
Thus, if after the end of a bullish trend, you notice the appearance of a bearish candle, you can calculate your trigger to go short if the stock price is 0.618 percent lower than the critical value. Conversely, in a bearish trend that is ending, if you have exited a short position, you can go long if the price happens to quote at a value that is greater by 0.618 percent of the critical value.
By combining the Fibonacci golden ratio with the Heikin Ashi haOpen and the visual chart, you have an efficient way to enter; exit or reverse positions by following price trends. You can now create a spreadsheet for yourself and verify trades taken in your favorite stock by back testing the rules of entry and exit. Remember that a trend will last only as long as it can, so all you have to do in order to profit from it, is to ride the trend by moving with it in whatever direction it takes you. The market, like the boss, is always right and it would be prudent for you to follow its dictates as revealed on your chart.
And if there are indeed noticeable patterns in price movement, you have a vantage point to profit from those patterns. Finally, it would be best if you stick to one simple trading style and to the simplest trading strategy that you are comfortable with and which works for you.