Heikin Ashi – also Heiken Ashi – is considered at the same time a technological consideration indicator and a chart type, in this regard, as well as someone applied. Traders who have familiarized themselves with Heikin Ashi, have all the chances to use it in their interests to establish the directions and reversals of rate changes in the most different economic bazaars. This can be applied to different trading strategies, such as day trading and swing trading.
Read on to find out how to use Heikin Ashi as part of your trading strategy in the samples acquired from our Next Generation trading platform.
What is the Heiken Ashi indicator?
Heikin Ashi means “moderate bar” in Japanese. The formulation averages the price movements of a standard candlestick chart. Since Heikin Ashi takes the average value movement, this type of video contains the tendency to demonstrate trends and reversals of rate changes more clearly than typical candlestick charts.
Heikin Ashi can be useful for short-term trading strategies, be it day trading or swing trading. It can be used in every trade, including forex, promotions, commodities, and indices. This type of video graphics and pointer have all the chances to help the trader to establish directions and be in grateful trades. But first, before using it, the trader must realize how someone is functioning, as the receipt of average values is also able to cause “wagon stones”.
Heikin Ashi candle patterns
Heikin Ashi is a variation of the candlestick chart, which is calculated differently. In a classic candlestick chart, the opening and closing values are shown in the variant of the full component of the candlestick (the actual torso), while the highs and lows are shown in the variant of the upper and lower shadows. This clear meaning of opening, maximum, minimum, and closing with the purpose of this asset in this short-term interval. Practically no manipulations together with the information are not made in any way.
At Heikin Ashi, there is a lush lobe referred to as the “actual body”, and in addition upper and lower cosmetics. The meanings used to form the meanings of opening, high, low, and close (OHCL) for the Heikin Ashi candlestick are in no way considered to be OHLC meanings, which possessed the main asset. Instead, Heikin Ashi candlesticks are based on the mediocre values of the current and past timeframes. This directly creates the most plastic Heikin Ashi charts.
Below is a sample video chart of the 1st and the same asset together with the use of both Heikin Ashi and regular candlesticks.
Renko vs. Heiken Ashi
In the Heikin Ashi chart, the average value significance is used to form candles. Renko charts also equalize the movement of the value, but they use different formulas and have a different type.
Renko’s plan consists of bricks or boxes of a specific volume. The volume can be selected (for example, $1 or 30 points) or can be created in the usual authentic spectrum. The newest Renko box is formed in the presence of moving the value of the underlying asset to the necessary value. For example, if the volume of the box is 1 buck, and the trader uses a short-term Renko plan, in this case, the newest single fight will be formed in the presence of moving the value up in a buck or more in the presence of closing at the base of the five-minute chart. The Renko bricks move and fall about 45 degrees and in no case are not directly present in the vicinity of the comrade together with the other. For this reason, for the Renko chart to move down, a decrease in value of 2 dollars (or in 2 selected brick volumes) is required.
Renco charts are not based in any way on the period, but only on the movement of value, even though the period without exception is also deposited in the x-axis of the chart. The development of the 1st Renko brick can take several days, in this case, the period as well as in another period can develop many bricks, due to the saturation of the price movement.
The following sample chart for Brent Crude Oil shows approximately a half-day cost situation. The left-hand side plan is the Renko plan with a brick value of $0.06, based on five-minute closing values. The plan on the right side is the Heikin Ashi plan.
How to use the Heiken Ashi indicator
Even though Heikin Ashi belongs to the type of charts, it is also considered as a technological indicator, because it acquires practical degrees of value of the underlying asset and then reorganizes these values based on Heikin Ashi composition.
The values in the Heikin Ashi differ from the values in the candlestick chart. The present value in the candlestick chart implies the final transaction or acquisition cost, while the present value in the Heikin Ashi chart is the present calculation of the HA closing cost. In some cases, these meanings have a chance to differ significantly.
Traders usually use Heiken Ashi for this purpose, to spoil price information and more correctly notice trading modifications, such as trends and reversals. However, the values displayed in the chart are often not considered trader’s values, as the actual value of the asset can vary. To get the best of both worlds: information in the present period, as well as proof and research, it is rational to observe the true value as well as the Heikin Ashi indicator.
Heiken Ashi moving average strategy
Heikin Ashi gives its traders signals, warning traders about a change in the trend of value movement. For this purpose, someone changes the color and direction of movement – from scarlet to greenish or from greenish to scarlet. Greenish candles indicate pressure to buy (bullish direction), and scarlet candles indicate pressure to sell (oblique direction). The addition of a moving typical pointer can help filter these signals so that operations take place only during the most powerful rate changes. A 50-period regular moving median (SMA) and a 12-period SMA have been added to the next day’s silver chart. As can be seen, there are several soft trends here, but also several unstable phases, which are crossed by the typical moving line.
A few simple rules could help lock in profits during a trend:
- Buy only when HA has turned from red to green within the last few candles, HA is above the 50-SMA (with a gap between HA and SMA), and the SMA is pointing up.
- Heikin Ashi should also be above the 12-period SMA with a separation.
- Exit trades when the HA turns from green to red.
- Alternatively, exit when HA closes below a shorter SMA such as the 12-period SMA.
- Only exit short if HA has turned from green to red over the last few candles, HA is below the SMA (with a gap in between), and the SMA is angled downwards.
- The Heikin Ashi should also be below the 12-period SMA with a gap.
- Exit trades when the HA turns from red to green.
- Alternatively, exit when HA closes above a shorter SMA, such as the 12-period SMA.
Using the Heikin Ashi in swing trading
Heikin Ashi charts can be used in any timeframe. The calculation is applied to the selected timeframe. Swing traders usually consider hourly, four-hour, or daily charts. The strategy discussed above can be applied to stocks, forex, commodities, or stock indices. Let’s look at another example, this time on an hourly chart of a stock index. If the asset is volatile, traders can look for a separation between the Heikin Ashi candlestick and the SMA. If the asset is not as volatile as the stock index, for example, the separation becomes less important because it does not occur as often.
The chart shows more possible entry points. Not all of them gave a significant profit, and many, on the contrary, gave small losses. In addition, there were a few deals with a huge benefit, in which the equipment of exit from the trade was used: the turn of HA in coloring or intersection of HA and liquidation according to the other side with the shortest SMA.
Scalping with Heikin Ashi
Scalping – this is a short-term trading policy, in the presence of which the trader rapidly enters and exits trades, often according to several once a period. In general, this policy is used in Forex trading. Even though Heikin Ashi charts can be used in every timeframe, scalping with the use of Heikin Ashi can provoke many problems, as the HA charts do not show a clear value of the asset in this period. HA charts are calculated according to the composition. In the presence of rapid transactions in the account every penny, section, or reduction, for this reason, understanding the clear value is very important.
Heiken Ashi reversal patterns
Short-term reversal modifications are formed if the Heikin Ashi plan switches from scarlet to greenish or from greenish to scarlet. The largest reversal modifications have a chance to be the most correct. Heikin Ashi reversal modifications are like candlestick reversal modifications, such as head and ramen, rounded bottoms, ternary and paired tops, and bottoms.
If a pivot pattern appears, it is possible to trade it in the same way as the candlestick version. As a variant, it is possible to apply the conclusion according to the typical moving average, as it was presented before, and to choose if the cost flows through the mediocre moving average (for example, 50-period) in the course opposite to the direction of the operation. Here is the “head and shoulders” turn in the four-hour USD/CAD chart.
A small access is performed in the presence of a breakthrough of the value beyond the reversal modification “head and shoulders”. Withdrawal from the operation is performed in the presence of crossing the value more than 50-period SMA or in the presence of gaining the value of the mission according to the income with the purpose of modification “head and shoulders”. Assumed task with the purpose of the form “head and shoulders” – this is the level of the form (approximately 1.37-1.35), withheld from the breakout point (approximately 1.35), with the purpose of the mission in 1.33.
Heiken Ashi difference indicator
Candlestick charts function well when the Heikin Ashi pointer is added to the plan. The Heikin Ashi pointer descends beyond the zero mark if the HA plan turns reddish or starts to move downward. The pointer rises above the zero mark if the HA plan turns emerald or starts to increase. Our Next Generation trading platform gives you the Heiken Ashi pointer to combine with candlestick charts or any other charts you like. Sign up for a live account here to experience the abilities of our web-based trading platform.
Heikin Ashi indicator for MT4
In addition, I recommend Meta Trader 4 software in our platform, which comes with an extensive set of industry and custom pointers for any trader’s strategy. MT4 does not provide Heikin Ashi charts and pointers by default, but thousands of user-generated pointers are readily available for download on the platform. Open the result in MT4 directly at present to start working.
When installing these products, you should consider that they were created by other MT4 users and not by our platform users, and for this reason, they have not passed the control in safety, reliability, and profitability.
Is the Heikin Ashi indicator reliable?
Heikin Ashi charts and pointers are ready to soften price swings, making it easier to spot trends and sell to stand out. But if a commercial Heikin Ashi warning appears, the true value can be very different from that which is demonstrated by the final liquidation of HA. This can make many trader’s signals untimely. For example, if the Heikin Ashi alert informs about the purchase of a promo stock according to the value of $5, but the value has jumped more and previously traded according to the value of $7. The difference between the trader’s signal and the true value can be very huge and, in a similar way, combine in the absence of profitability of a possible operation.
Since HA charts are based on the usual movement of the value, this in addition complicates their use to install stop-loss degrees. In the sample strategies trailing stop-loss was used together with a typical moving or tone change in the HA chart. This can work, but the danger in the basis of trading is unknown. To control the danger of the presence of a strong degree of stop-loss, you should resort to a simple candlestick chart. In this way, the stop loss can be determined based on price degrees and modifications that the cost has formed, and not based on the mediocre meaning of HA, which distorts in this case, where the cost existed.
Just like every other industrial indicator, the trader must realize the rule of Heikin Ashi activity, its advantages, and disadvantages, first, before someone can effectively use it in trading.