One should trust the statement; a successful trader always has a “Samurai” mindset. Samurai is a legendary warrior who belongs to Japan. The Heikin Ashi technique is also the drop fall of Samurai culture because it has similar rules which lead the Japanese Samurai.
The Heikin Ashi strategy is just another way to look at the charts. The traders use the chart to mark the opportunities related to trading. It is known as the revolutionary and relatively simple method, which is applicable for all time frames.
Additionally, swing trading, day trading, and trend following have no concern with your trading style and which method you use. The Heikin Ashi trading method is one of the best which you can apply to make a good decision.
In the beginning, you will get the basic idea of this Heikin Ashi charting technique. After that, I’ll discuss the chart, the formula used for the chart, and the advantages of this trading system.
What is the Heikin-Ashi Technique?
You may know that the Line chart, Bar chart, and Candlestick chart are the extensively used price settings of the current time. Besides this, there are also some minimally used techniques for trading. One of them is Heikin Ashi.
This revolutionary trading chart provides the traders to have a deep and broad view of the trading market. It will prove immensely helpful when you need to have accuracy in entries and exits.
As the Heikin Ashi is a well-known charting technique in the era of trading. So, the trader can follow this strategy to forecast the prices in the future and read the upcoming price action.
It got a resemblance to the candlestick trading charts except for the slight dissimilarity from the candlestick chart. The Heikin Ashi chart can clear some market noise to stop the market trend.
If you are a trader and will use this technique for trading purposes, you should know the developer of Heikin Ashi. He is named as “Munehisa Homma”. He developed this strategy in the late 1700s.
This strategy has some features which are similar to the traditional chart called candlestick. But it also differs from the candlestick chart as it has computed values.
Heikin Ashi – is a Japanese word. The Heikin words are for “balance or average,” and the Ashi word stands for the meaning of “foot or bar.” So, the complete meaning of Heikin Ashi is an average bar that resonates along with trading strategies. It utilizes the average amount of security.
Besides the minor differences, there is one significant contrast between these two, Heikin Ashi and the candlestick chart. And this difference is that latter which uses an adaptable formula. The formula lay on a couple of periods that precede averages rather than low, high, close, and open prices.
Consequently, this strategy creates a smoother trading chart by which it becomes possible and easy to find reversals and trends. On the other hand, this graph has unclear gaps and price features.
To calculate the formula, open-close data can take from the recent session, and the OHLC – open-high-low-close data can take from the present period.
The OHLC values, which are now modified, and will display as candlesticks form. The computing method to calculate the formula is given below:
Close = (Open + High + Low + Close) / 4
Open = [(Open price of previous candle) + (Close price of previous candle)] / 2
Low = Minimum Price Reached
High = Maximum Price Reached
-1 – Prior period figures
HA – Heikin-Ashi
0 – Current period figures
There is an excellent possibility that data of Heikin Ashi could be from various period frames. Like, it can be from monthly, weekly, or intraday. The HA Open will be set on the central point of the recent bar body.
The calculation of HA Close can be given by the average rate of the new bar. The HA High – which is known as the elevated value, will set in the middle of the present high, HA Close, and HA Open.
The HA Low – which is the short value will set in the middle of the present low, HA Close, and HA Open.
Constructing the Heikin-Ashi Chart
There is usually the red color of the candle of the Heikin Ashi graph, which indicates the downturn. On the other hand, the green color will be displayed, which means the upturn. However, different types of colors were also used for indications of upturn and downturn.
The Heikin-Ashi graph comes with straightforward directionals which flow with the bars present in the identical color and offers you the exact image of the price movements. However, there are some differences between the Heikin-Ashi graph and the candlestick chart.
However, if we talk about the differences, then the pattern of the conventional candlestick contains different colors of candles like red and green. This thing will make it hard for most traders to identify the latest trends.
As compared to this, the Heikin Ashi graph shows the consecutive colors and also reduces the noise. Because of all these reasons, it is effortless for most traders to quickly identify the trends.
Heikin-Ashi Indicator Signals
The Heikin Ashi indicator sets the different trends in the trading market, and the main trends of this strategy indicator signals are given below.
1. Trend Strength
It is the first and primary aspect of the Heikin Ashi indicator signals. In this, it calculates the current progress of the trend. But remember one thing, it might be possible that the minor correction in the trend will be invisible because of the indicator smoothing effect.
But we recommend that if you want to trade with this Heikin-Ashi technique’s help, you must use the trailing stop. With the help of this, you can quickly increase your rewards. If you notice that the trend is strong, you should stick to the trend to make more profit.
2. Bullish Trend
The bullish trend is a powerful sign of the uptrend, and it will display with the help of too many green candlesticks. All these green candlesticks are present without shadows.
3. Bearish Trend
The Bearish trend is the opposite of the bullish trend. And basically, it is a signal for a downtrend and appears with the help of too many red candlesticks. And these red candlesticks don’t contain the upper shadows.
The Heikin-Ashi triangles are of three types, including symmetrical, ascending, and descending. But, if the marker of the Heikin-Ashi will smash over the upper line of the ascending or symmetrical triangle of Heikin-Ashi.
Then in this situation, the uptrend continues, other than this, if the candle falls below the Heikin-Ashi descending triangle bottom line. In this situation, bearish trends carry on and become stronger.
If you are a trader and want to increase your margin and profit, you must follow all the given strategies below.
1. Strong Bullish or Bearish Trend
The bullish and the bearish trends are the commonest and best strategies of Heikin-Ashi. This strategy provides you the opportunity to pick out the uptrend and the downtrend.
However, the Heikin-Ashi signal indicators are not correct because these signal indicators are robust and reliable. With the use of these signal indicators, any trader can quickly increase their profit.
2. Identify Candlesticks with No Shadows
If you identify the candlesticks that don’t contain the shadows anytime, then it means that the bullish trend starts. This is the main strategy of the Heikin-Ashi. The reason behind this is that it constantly records the success and the performance rate.
Other than this, if the order of candlesticks is high, then there the trend will also be substantial. If you identify the candlesticks that don’t contain the upper shadows, it means it is the beginning of the bearish downward trend.
Every trader needs to be careful because anytime trends might be stopped. In this situation, traders have to use their experience to decide if the trend is pausing or the trend is going reverse.
Benefits of the Heikin-Ashi Technique
The Heikin-Ashi technique comes with too many benefits, and some significant benefits are given below.
If we talk about the accessibility of the Heikin-Ashi technique, then for your kind information, it is the most accessible. The best part of this is you don’t need to install anything, and all the trading platforms contain this.
The Heikin-Ashi graph is considered one of the reliable indicators, and it always shows you the exact results. However, this indicator always uses old figures, and it is reliable.
3. Filtering of Market Noise
Another benefit that you get is that the Heikin-Ashi indicator removes the noise and makes the adjustments of minor corrections. With the help of this, the signal will be more transparent. It is a fact that nowadays there is too much noise in the market and
It is a fact that nowadays, noise reduction is significant because the market has huge noise. By noise reduction, the Heikin-Ashi strategy allows every trader to make starting and ending points efficiently.
4. Timeframe Tolerant
The next benefit that you will get is the timeframe technique. The best part of this technique is that you have the opportunity to use it any time, like any hour, any day, and any month. Remember one thing that the big time frame is reliable for you.
Frequently Asked Questions (FAQs)
Is Heikin Ashi reliable?
Yes, Heikin Ashi is the reliable indicator that provides you with accurate results. Other than this, it is also better than the traditional candlestick charts, with the help of this you can easily identify the market’s movements and trends.
Is Heikin Ashi profitable?
Yes, the Heikin-Ashi considered itself profitable over a long period. The reason behind this is that they always give the best winning percentage.
How do you use Heikin Ashi?
If you want to create the first HA candle, then with the help of the formulas given below, you can use the one period to make it. For example, with the help of open, close, low, and high formulas, you can create the first HA.
Open = (open of previous bar + close of previous bar)/2.
Close = (open + high + low + close)/4.
High = It is the maximum value from the high, open, or close of the current period.
Low = It is the minimum value from the low, open, or close of the current period.
How do you read the Heikin Ashi indicator?
There are candles present in the Heikin Ashi technique; one is green, and the second is red. However, the green candles tell you about the buying pressure that is a bullish trend, and the red candles will tell you about the selling pressure that is a bearish trend.
The Heikin Ashi technique allows you to make more profit. If we talk about the other benefits, you will get too many with the help of Heikin Ashi trading strategies like reliability, accessibility, and many more.
The Heikin Ashi is one of the best trading techniques that you can use to trade. Suppose you are a trader and are afraid of noise created by the classical candlestick chart and do not understand it. Then it would be best if you used the Heikin Ashi technique.
I hope the complete article related to the Heikin Ashi strategy will, and if you want to know anything else related to this or any questions, ask us in the comment section.