Discussing the article: "Price Action Analysis Toolkit Development (Part 54): Filtering Trends with EMA and Smoothed Price Action"
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Check out the new article: Price Action Analysis Toolkit Development (Part 54): Filtering Trends with EMA and Smoothed Price Action.
This article explores a method that combines Heikin‑Ashi smoothing with EMA20 High and Low boundaries and an EMA50 trend filter to improve trade clarity and timing. It demonstrates how these tools can help traders identify genuine momentum, filter out noise, and better navigate volatile or trending markets.
In volatile or transitional market phases, candlestick charts often display large bullish or bearish bars that suggest strong momentum but are in fact the result of short‑term fluctuations. These misleading signals frequently appear during shallow retracements or low‑volume sessions, when price briefly moves above or below recent ranges without a true change in underlying trend. Acting on them can mean buying into the tail end of a correction or selling just before the market resumes climbing, scenarios that produce whipsaws and erode trading consistency.
This system was developed to prevent those false positives. It combines Heikin‑Ashi smoothing with exponential moving average filtering so that visually strong candles are traded only when they align with measurable momentum. The Heikin‑Ashi layer recalculates each bar from averaged OHLC values, producing a chart where colors follow sustained trends and change only at genuine reversals. This offers a cleaner directional picture than conventional candlesticks, easing identification of the prevailing bias.
To guard against the situations where Heikin‑Ashi can mislead, such as a single bullish candle in the middle of a downtrend, the strategy adds a second layer of validation. EMA50 calculated on closing prices defines the broad directional context, with its slope providing a quick, numerical measure of trend strength. A pair of EMA20 lines, calculated on highs and lows, frames recent price extremes. Before a Heikin‑Ashi signal is accepted, it must break beyond these EMA20 boundaries and agree with the EMA50 slope. If either condition fails, the setup is ignored.
By enforcing agreement between smoothed visual signals and structural trend metrics, the mechanics ensure that trades are taken when short‑term momentum, long‑term bias, and candle structure all point in the same direction. This reduces exposure to noise, preserves the clarity that makes Heikin‑Ashi appealing, and integrates disciplined quantitative checks into an otherwise visual method.
Author: Christian Benjamin