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Finaxion Research · Heikin Ashi: follow the coloured candles · indices and ETFs · Recomputed 2026-09-10

Does Heikin Ashi: follow the coloured candles work on IWM?

Heikin Ashi: follow the coloured candles does not beat buy-and-hold on IWM: -15.3 points a year over 26 years.

Total return
-83.0%
Buy and hold
801.9%
CAGR
-6.5%
Sharpe
-0.61
Max drawdown
-86.1%
Trades
1790
Out of sample
overfit
Years
26
1×9×2001200320052007200920112013201520172019202120232025
StrategyIWM

Findings

  1. Heikin Ashi: follow the coloured candles does not beat buy-and-hold on IWM: -15.3 points a year over 26 years.
  2. Against the S&P 500 over the same window: -15.2 points a year.
  3. Total return -83.0% versus +801.9% for buy-and-hold, with 1790 trades.
  4. The result does not hold out of sample: it is overfit.
  5. Maximum drawdown -86.1%.
  6. It beats in neither half of the history (split at 2013).
  7. It ranks #172 of 235 markets for this strategy by annual excess over the S&P 500.

Findings derived from the full panel. Each carries its number and its denominator; the computations are reproducible with artifact 2aad8ceec7e6.

Exactly what was tested

Long while the Heikin Ashi candle is bullish (HA close above HA open); exit on the first bearish candle.

How to read it

The verdict compares the strategy with buying and holding IWM over the same window, with round-trip costs per asset class. “Out of sample” is walk-forward: the rule is fit on one stretch and judged on the next. A result that beats in the full sample but not out of it is overfit. Full methodology in the protocol. How we test.

Open this backtest with its trades   Trades (CSV)

Every strategy on IWM → · Full page for Heikin Ashi: follow the coloured candles →

How to cite

Finaxion Research (2026). Does Heikin Ashi: follow the coloured candles work on IWM?. Daily backtest 1962-01-01–2026-08-31, artifact 2aad8ceec7e6. https://finaxion.app/en/research/heikin-ashi/iwm

Not a recommendation. Past performance does not guarantee future results.