Constructing a three-state Heikin-Ashi trend filter

What the filter plots

The long-horizon Heikin-Ashi filter is constructed as a three-state plot: 100 for a long condition, 50 for a long exit or neutral state, and 0 for a short or negative state.

Editorial framing: the steps below separate Heikin-Ashi structure, the lag-reduced smoother, and the Moving average sell gate so each construction choice can be inspected on its own. That teaching order is editorial, not an archive claim.

Heikin-Ashi open and close

Heikin-Ashi open is built recursively as the midpoint of the prior Heikin-Ashi open and the current typical price.

Heikin-Ashi close averages that open with the max of high and that open, the min of low and that open, and typical price.

A second-stage lag-reduced smoother

The construction applies a second-stage lag-reduced smoother separately to Heikin-Ashi close and to the high-low midpoint.

The smoother has the form 2 times a triple exponential average minus a second triple exponential average of that result.

One published construction uses a 55-bar triple exponential smoother length.

Short candles and state persistence

A short-candle flag is defined when the absolute open-to-close range is smaller than the high-low range multiplied by the candle-size factor. One published construction uses a 1.1 candle-size factor to classify short candles.

Up-state persistence combines consecutive Heikin-Ashi closes at or above Heikin-Ashi opens, raw-price strength versus Heikin-Ashi close, higher highs or lows, and the smoothed midpoint remaining at or above the smoothed Heikin-Ashi close.

The down-state uses the inverse comparison set.

The Moving average sell gate

The long-term sell gate is an exponential moving average of close. One published construction uses a 60-bar exponential average of close as the long-term sell gate.

Once that gate is triggered, the Trend filter cannot remain in the 50 state and drops to 0 unless a new buy-state condition is present.

Three construction knobs

Independent platform reconstructions expose the same three construction knobs: the triple-exponential length, the long-horizon average used for shorting or exiting, and the candle-size factor.