Trading Heikin-Ashi Candles on MT4 and MT5 vs. Candlesticks

So, you want to try trading Heikin-Ashi on MT4. In the past, you had to download and install some files on MT4 to become able to use Heikin-Ashi because MT4 didn’t support this indicator or special candlestick. But you don’t have to do it now. The latest versions of MT4 and MT5 support Heikin-Ashi. Let’s start from activating it on your MT4 or MT5 platform, and then focus on the chart analysis and trading strategies that you can follow to trade using Heikin-Ashi, and whether it is better and easier than regular candlesticks or not.

Activating Heikin-Ashi on MT4 or MT5

1. On MT4 or MT5, just open a price chart and then refer to the “Insert” menu at the top. Open the menu, then Indicators, Custom, and then click on Heikin-Ashi:

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Activating Heikin-Ashi on MT4

2. I suggest you to change the colors as below:

Heikin-Ashi Colors on MT4

3. Click on the “Line Chart” icon at the top to turn off the regular candlesticks that can still be seen under the Heikin-Ashi candles:

Switch to Line Chart

4. Now you should change the line chart’s color to “None” by right-clicking on the price chart and clicking on “Properties” or by pressing the F8 button. You need to do this to see only the Heikin-Ashi candles on the chart:

Line Chart Color

5. You have the Heikin-Ashi candles on the chart now. You can do another thing to make it easier to have the same thing on the price charts when you open a new chart. You can right-click on the chart, click on “Template” and then “Save Template…”. You can give a name like Heikin-Ashi to the template, and then load it on the new price charts that you open on the MT4 platform. To save you some time, I have saved the template file that you can download HERE and then apply on the price charts. You don’t have to download any Heikin-Ashi indicator for MT4 or MT5 anymore. You can just download my template file for free and apply it to the price charts. If you do so, you will have such a price chart on MT4 or MT5 platforms:

Trading Heikin-Ashi on MT4

It is the same process on MT5 to have Heikin-Ashi candles on the charts.

What Is Heikin-Ashi?

Heikin-Ashi candles look like the regular Japanese candlesticks (read this to learn about the regular candlesticks). However, there is a big difference between them. In regular candlesticks, each candlestick is independent and has no relation with the previous and next candlesticks. Each regular candlestick represents four prices (open, high, low and close), but Heikin-Ashi candles are like moving averages to eliminate the price noise. Indeed, Heikin-Ashi candles eliminate lots of noise and create some delays, and so most traders think that they are good for novice traders who haven’t become disciplined enough to wait for a strong trade setup to get in the markets. I will tell you if they are right or not.

In Heikin-Ashi candles, the open price is the average of the open and close prices of the previous candlestick. It means, the system or the trading platform, be it MT4, MT5 or all other platforms that support Heikin-Ashi, they use the regular candlesticks data to plot the Heikin-Ashi candles; or I’d better to say they use the same time-frame’s open, close, high and low prices that are used to plot the regular candlesticks on the charts, to plot the Heikin-Ashi candles.

When the open price of a candle is the average of the open and close prices of the previous candlestick, it eliminates some of the price fluctuations’ noises. However, this is not all the story. The close price of a Heikin-Ashi candle is the average of the open, close, high and low prices of the previous candlestick. It means, the close price is even more smoothed. The high price of a Heikin-Ashi candle is chosen from one of the high, open and close prices the previous candlestick that is larger than others. And, the low price of a Heikin-Ashi candle is chosen from the previous candlestick’s low, open and close prices that is the smallest.

What do all of these mean?

It means Heikin-Ashi makes the price movements and fluctuations look smoother. It eliminates the noise. That’s all. It is not a miracle, or it doesn’t turn you from a losing trader to a consistently profitable trader overnight. It just creates some delays. Many novice traders lose because they get in and out of the markets too early, and as Heikin-Ashi creates delays, it can prevent these traders from jumping in and out of the markets too early. Additionally, it lowers the number of the signals and trade setups because it removes many of the ups and downs, and so it prevents overtrading.

In spite of this, I prefer to use the regular candlesticks because I am not used to get in and out too early, and I can filter out the noise and wait for the strong and true trade setups. I don’t think that Heikin-Ashi candles are the solution for losing novice traders. These traders must learn more and gain more experience through trading the regular candlesticks. Heikin-Ashi candles can cause them to lose even more. Below, I will explain this in more detail and will show you some proofs, and also if you insist to use Heikin-Ashi candle, I will tell you how to use it to have a higher success rate and better R/R ratio.

What Is Smoothed Heikin-Ashi Indicator?

Smoothed Heikin-Ashi is even slower. It is for those who want to follow the long and continued trends. Therefore, they must wait a lot for the trends to start and form because you will never know when a trend is started with the first few candlesticks. You must wait a lot. However, by the time Smoothed Heikin-Ashi tells you to get in because a trend is formed, you have lost most part of the movement, and it is possible that the market turns around and hits the stop loss because even Smoothed Heikin-Ashi cannot tell you when a trend is started. Markets trend less than 30% of the time, and trying to trade the markets based on Smoothed Heikin-Ashi means losing in several positions to have a winning position which can be taken only less than 30% of positions.

There are so many better and more optimum ways to get in the markets, even before a trend starts, and then take the continuation signals to follow the trends. You can have a more optimum and efficient stop loss levels, and have smaller losses. Heikin-Ashi and Smoothed Heikin-Ashi are too delayed and cause you to have bigger losses before you succeed to follow the trends.

Trading Heikin-Ashi vs. Regular Japanese Candlesticks

Please look at the screenshot below. Heikin-Ashi chart is at the left and regular Japanese candlesticks are at the right. Both are the EUR/USD 15min charts. Can you see the difference? If I want to summarize all the difference in one sentence, I can say that buy/sell signals or trade setups appear with one candlestick delay on the Heikin-Ashi chart.

For example, please look at the 2021.03.12 17:30 candle on both charts. On the regular candlestick chart, it is a big bullish candlestick that has formed a too strong buy signal or long trade setup, because it has formed such a strong Bullish Engulfing Pattern, which is a too strong and my favorite candlestick pattern to go long. Therefore, I would go long (buy) at the close of this candlestick.

However, if I wanted to trade based on the Heikin-Ashi chart, the 2021.03.12 17:30 candle wouldn’t tell me to buy because it didn’t show any signals. It is just a candlestick with a small body and long shadows. Although the shadows are long, still they cannot be known as a buy signal. It was the next candle, which is 2021.03.12 17:45, that would tell me to buy because it is a long and strong bullish body that has formed a strong Bullish Engulfing Pattern, which is a strong buy signal. If I wanted to enter the market at the close of this candlestick, then same candlestick on the regular candlesticks charts would tell me it is too late to go long because the price has already moved up.

Therefore, for a trader like me, who knows the candlestick signals very well and likes to get in the markets on time, Heikin-Ashi candles are too delayed, both to get in and out.

Trading Heikin-Ashi vs. Candlesticks

So, the conclusion so far is that if you learn the regular candlestick signals and patterns, you can have a better and more optimum entries and exits. However, if you are so new to Forex trading and you haven’t developed the disciplined to take the best and strongest signals, and you still overtrade, then Heikin-Ashi can help. However, I don’t think it can help you to become a consistently profitable trader. Heikin-Ashi is not my choice and recommendation to any trader.

So, What Are Heikin-Ashi Disadvantages?

Delay is the biggest disadvantage of Heikin-Ashi candles. They make you get in and out with delay. So, you enter the markets when the movement has already been started and you have missed some part of it, and there is a higher chance to reverse. Additionally, you will get out when the price has already reversed and you have lost some part of the profit you have made.

Therefore, I don’t see any advantages in using Heikin-Ashi. I prefer to use the regular candlesticks because they are on-time and real-time.

What is the point of having delays??? If you haven’t become disciplined enough to get in the markets only when a strong and true trade setup has formed, and so you overtrade and lose a lot, then Heikin-Ashi is not the solution. You must demo-trade and practice more to improve and develop your discipline. As a professional trader who has been trading, mentoring, writing and programming in this sector for years, I don’t recommend you to use Heikin-Ashi, either the default or the smoothed one, at all.

What Is the Best Heikin-Ashi Trading Strategy?

In spite of everything you learned above, if you still want to try trading with Heikin-Ashi, which is something that I don’t recommend at all, you can use the strategy below, at least to have a better and more optimum entry and exit.

One of the ways is having Bollinger Bands added to the chart and use Bollinger Upper and Lower Bands breakouts, at the same time with the big and strong Heikin-Ashi candles that have long shadows. The chart below shows one long trade setup (buy signals) and two short trade setups (sell signals). Why?

In the long trade setup, a candle has formed a long lower shadow and broken out of Bollinger Lower Band strongly. It is the same with the long trade setups. Just the direction is opposite and Heikin-Ashi candles have broken out of Bollinger Upper Band very strongly, which is something you don’t see with other candles. If you wait for the trade setups like this, you will have a higher success rate.

Heikin-Ashi Trading Strategy

Lastly, I see that most traders pronounce the name Heikin-Ashi incorrectly. This is a Japanese name. You must trade the second word as Asahee not Ashi ­čÖé

If you are really new to Forex and you want to start making money with it, then be careful because you can waste lots of time and money, and then give up before making any money. Looking for the things like Heikin-Ashi is the sign that you are not on the right track yet and you can get yourself into trouble by following the bad systems and scams. Start from here: What Is Forex and How Do Forex Traders Make Money?

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The LuckScout Team

"Whether you think you can, or you think you cannot, you are right." - Henry Ford

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