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Heikin-Ashi, as the Modified Version of the Regular Candlestick, a Strong Tool to Filter out the Markets Noise

On forex or stock market, we can make or lose money when the price goes up and down.

We have to become able to understand what party, bulls or bears, have taken the market’s control.

Then we can make money by following the dominant party.

Different traders do this using different methods.

But for most traders, technical analysis of the price chart, is the easiest way.

So they spend a lot of time to learn the technical analysis.

In fact, technical analysis was invented and introduced by Japanese traders by the invention of the candlesticks.

Those who are familiar with the candlestick charts, know that it is the best and fastest way to understand the condition of the markets and the psychological situation of the buyers and sellers.

Japanese traders didn’t stop improving their technical analysis methods and tools.

They worked a lot and tried to make the technical analysis and the price direction prediction easier and faster.

As a result, Heikin-Ashi chart that came after the candlestick chart is one of the several different achievements of the Japanese traders.

Heikin-Ashi charts are easier than candlesticks to understand and trade.

In this article, I am explaining about the Heikin-Ashi signals and analysis.

I will compare them to the candlesticks.

Then will I talk about our opinion about Heikin-Ashi charts and the way that you can use them in your trades.

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So What Is a Heikin-Ashi Chart and How Does It Look Like?

Heikin-Ashi charts look like the candlestick charts.

But the method of the calculation and plotting of the candlesticks on the Heikin-Ashi chart is different from the regular candlestick chart.

If you use the MetaTrader platform or MT4, you can download the free Heikin-Ashi and Smoothed Heikin-Ashi templates HERE to install them on your MT4 platform.

In candlestick charts, each candlestick shows four different prices:

  1. Open
  2. Close
  3. High
  4. Low

(it is recommended to learn the candlesticks here before you go ahead and read this article).

On the candlestick charts, each candlestick is independent and has no relationship with the previous or next candlesticks.

But Heikin-Ashi candlesticks are different and each candlestick is calculated and plotted using some information from the previous candlestick:

1. Open price:

The open price in a Heikin-Ashi candlestick, is the average of the open and close price of the previous candlestick.

2. Close price:

The close price in a Heikin-Ashi candlestick, is the average of the open, close, high and low prices.

3. High price:

The high price in a Heikin-Ashi candlestick, is chosen from one of the high, open and close price of which has the highest value.

4. Low price:

The low price in a Heikin-Ashi candlestick is chosen from one of the low, open and close price of which has the lowest value.

So candlesticks of a Heikin-Ashi chart are related to each other, because the open price of each candlestick should be calculated using the previous one candlestick’s close and open prices.

Also the high and low prices of each candlestick is impacted by the previous candlestick.

So a Heikin-Ashi chart is slower than a candlestick chart and its signals are delayed.

They work somehow like a moving average.

What Are the Advantages and Disadvantages of the Heikin-Ashi Delay?

Such a delay eliminates a lot of noise and creates a much smoother charts.

It makes the Heikin-Ashi charts a good indicator for the noisy and choppy markets.

It prevents the traders from being deceived by many of the false reversal signals and trade setups.

Let’s see how a Heikin-Ashi chart looks like and compare it to a regular candlestick chart:

Heikin-Ashi vs Regular Candlestick

The above chart has two parts.

The upper part is the Heikin-Ashi chart and the lower part is the regular candlestick chart.

Numbers 1 and 2 in the candlestick chart, show a sell signal.

Now, compare these signals with the Heikin-Ashi candlesticks number 1 and 2.

As you can see, the Heikin-Ashi candlesticks don’t show any sell signal yet and they both look green (bullish).

The regular candlestick #2 is bearish and has formed a small Dark Cloud Cover which is a reversal signal.

It is just the Heikin-Ashi candlestick number 3 that shows a signal.

So, Heikin-Ashi candlesticks are about one or two candlesticks delayed.

If you wanted to trade using the above chart and with the regular candlestick chart’s signals, you could go short when candlestick number 3 broke below the low price of the candlestick number 2.

However, if you wanted to trade only using the Heikin-Ashi chart, maybe you would have to wait for the candlestick number 4 to form.

Maybe even you would never enter because the signal didn’t look that strong.

On the other part of the above chart, the regular candlesticks number 5, 6, 7, and 8 made another good reversal sell signal or short trade setup.

You could go short when the regular candlestick number 9 broke the low price of the candlestick number 8.

But to go short according to the Heikin-Ashi chart, you would have to wait for the Heikin-Ashi candlestick number 9 to form completely, and probably the next one to break below the low price of the candlestick number 9.

So the Heikin-Ashi charts are delayed and the regular candlestick charts are much faster.

Why Should You Use a Heikin-Ashi Chart Then?

According to the above explanations, because of the Heikin-Ashi charts delays, they eliminate a lot of noise and have less number of false signals.

Therefore, they prevent you from trading against the market.

On the other hand, Heikin-Ashi candlesticks are easier to read, because unlike the regular candlesticks, they don’t have too many different patterns.

Different Kinds of Heikin-Ashi Candlesticks

1. Bullish Candlesticks:

When the market is Bullish, Heikin-Ashi candlesticks have big bodies and long upper shadows, but no lower shadow.

Look at the big uptrend in the below chart.

As you see, almost all of the candlesticks have big bodies, long upper shadows and no lower shadow:

Bullish Heikin-Ashi Candlesticks

2. Bearish Candlesticks:

When the market is Bearish, Heikin-Ashi candlesticks have big bodies and long lower shadows, but no upper shadow.

Look at the big downtrend in the below chart.

As you see, almost all of the candlesticks have big bodies, long lower shadows and no upper shadow:

Bearish Heikin-Ashi Candlesticks

3. Reversal Candlesticks:

Reversal candlesticks in the Heikin-Ashi charts look like regular Doji candlesticks.

They have no or very small bodies but long upper and lower shadows.

Look at the reversal candlesticks in the below chart:

Reversal Heikin-Ashi Candlesticks

How to Use the Heikin-Ashi Charts to Trades

Some traders, specially Japanese traders, only use Heikin-Ashi charts to trade.

It is a good idea specially for those who are not patient and disciplined enough.

Those who lose because of entering too early and exiting too late can also use this candlestick chart.

It helps you follow the trending markets, because it keeps you waiting for a longer time

Then it lets you get in when you are at the beginning of a strong trend.

You can have both of the regular candlestick and Heikin-Ashi charts on your trading platform and add a 14, 7, 3 Stochastic.

Buy when both of the Stochastic fast and slow lines go up from the oversold area, and at the same time both the regular candlestick and Heikin-Ashi charts show reversal signals.

Sell when both of the Stochastic fast and slow lines go down from the overbought area and at the same time both the candlestick and Heikin-Ashi charts show reversal signals.

First try the above strategy on the back data and see how it looks.

Then try it on a demo account and make sure you can make profit with it consistently.

Trading the Heikin-Ashi and Regular Candlestick Charts with Stochastic

Two more trade setups:

Two more trade setups

Another good short trade setup:

Another good short trade setup

A good long trade setup:

A good long trade setup

You can demo trade and see how it works.

Heikin-Ashi and MACD

MACD is a lagging indicator.

All the indicators are lagging, but MACD is even more lagging.

Combination of MACD and Heikin-Ashi and confirming the Heikin-Ashi trade setups by MACD, helps you filter out many of the false trade setups and take the best and the strongest ones.

MACD is great in following the trends.

This is the biggest feature of Heikin-Ashi too, however, MACD is a good complement of this feature.

Read this article to see how you can use a slower settings of MACD which is 24, 52, and use the MACD bars to follow the trends, and locate the reversals through MACD divergence and convergence: How to Use MACD Indicator?

Bottom-line:

The last tip here is that there is no Holy Grail trading strategy.

All the trading strategies are able to locate some buying and selling opportunities, and Heikin-Ashi is not an exception.

It is you who has to master the trading strategies and use them efficiently, otherwise they can’t do anything but making you lose money.

Learn more:

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38 thoughts on “What Is Heikin-Ashi and How to Trade with It? [With Pictures]
  1. Pete says:

    Very interesting article.
    On MT4 if you set chart to background then put Heikin Ashi on top and just set the sizes up you get the best of both worlds in one hit.
    Just trading candlesticks I would often come out to soon but with HA sitting in the candle I often now go through the pull backs/dips to get more profit.
    Try it out Use Metaeditor to sort the colors to be contrasting and of the correct sizes
    how do I send you screenshot
    cheers
    Pete

  2. Simon says:

    After download the Heikin Ashi candle chart. MT4 data window shown –
    Heiken Ashi =1.4559
    value 2 = 1.4497
    value 3 = 1.4559
    value 4 = 1.4522

    which one is Open. high. low. close ?

    Thank you, sir !

  3. Roni says:

    Thank you for your helpful article..
    i am newbie in trading articles was so useful. i already subscribed and waiting for your upcoming articles…

  4. Igor says:

    MY HA daily chart is not correct, seems like it is showing candles 4 days in past. When price is up 4 consequtive days, I still see red (down) candles on my daily HA charts. Please help. Thank you.

  5. EPC says:

    TQ sir..very smart article…
    Wht’s the setting ‘price field’ & MA Method for the stochastic sir.

  6. Shafque says:

    Hello Chris,
    This is good to know all things about Heikin Ashi. I need to know thing. Will I have to follow resistance & support level also in this chart?

  7. Bill says:

    Hi..

    Not real clear…%K is what? %D is what? Period is what?

  8. Bill says:

    Hi guy… thanks for responding. My Stochs with those settings on MT4 are not at all as smooth as detailed in your posting, but thank you.

  9. Ndubueze says:

    The article was very helpful. I got to know about Heiken Ashi candles yesterday. Thanks a whole lot

  10. Dogan says:

    What is the difference of calculation between smoothed and normal Heikin-ashi chart? Why the next one to slow?
    Thanks

  11. BEREKET says:

    Hi Chris, I love your articles. I am a beginner in the trade. I do not have good charts in my computer where can I get the heiken ashi chart.
    thank you

  12. Paul says:

    Mr. Chris.
    There is another Heiken Ashi, named “Heiken Ashi Zone Trade”.
    You can see it here: http:// -indicators.net/trend-indicators/heiken-ashi-zonetrade

    Can you analize it and comment about it to us?

  13. David Sotomayor says:

    Hi Chris. Thank you for your articles. I have been demo trading this strategy for the last couple of months on daily charts. I like it. I have been using Stochastic settings of 8, 3, 3. I would like to know if any other members on the site have been using the strategy and their results.

    Thanks!

  14. Julius Burmeister says:

    Hi Chris

    This is my first time I write to you. My question is, why is your stohcastics lines both in red (sell) and green (buy). Do you use a different stohcastics?

    I demo now for quite a while with Choice and will open a live account later with them. What is your or any of the other traders on this forum’s opinion about this broker?

    I have trade on different time frames, but since last week I desided to change to the day time frame which I found more relaxing and easier profiting. I use Heiken Ashie and and CCI(14) together with a Slope direction Line(30) that change color as the HA change color.

    Furthermore, I find your articles very helpfull and will experiment with your stohcastics as soon as I here from you.

    Thanks
    Julius

  15. Julius Burmeister says:

    Hi chris

    Thanks for the quick reply. Good I will check it out and let you know of any outcome.

    Have a good day.

    Julius

  16. Julius Burmeister says:

    Hi Chris

    I try to download your free eBook,but so far I could’nt. Let me know what to do.
    Thanks
    Julius

  17. Julius Burmeister says:

    Thank you Chris, I got it.

    Julius

  18. Gideon Alemede says:

    I HAVE BENEFITED GREATLY FROM YOUR EXPLANATION OF HEIKIN ASHI AND HOW TO USE IT. THANKS.

  19. Steve Baumgaertel says:

    Certainly something I will try on a separate demo account.

  20. Julius Burmeister says:

    Hi Chris

    I have downloaded the Heiken Ashi Smooth on my MT4, but the green price line does not show.

    I tried to copy and paste a snip here, but unfortunately one can’t do it.

    Thanks for any reply.
    Julius

  21. Julius Burmeister says:

    Hi Chris

    Is there a video about the Heiken Ashi Smooth, showing one how to trade with it?

    Thanks for a reply.
    Julius

  22. Julius Burmeister says:

    Hi Chris

    Thanks for the reply on both my questions. I will let you know if there is still problems with the download.

    Have a nice week.

    Julius

  23. Caleb I says:

    Please how can I have the heiken ashi chart and a normal candlestick chart on a single chart window the way you arranged it with the stochastic indicator or do I need 2 computer screens?

  24. Arpad Huszty says:

    Hi Chris

    If I use the Heikin Aschi chart and I see a reversal pattern ( on the H1 , H4 ) after that I see a formation ( ear cup) in which case hit it the price Fibo200 fibo 261,8 and fibo 423,6. I hink I can watch the directin of the higher time frame or I wach only a time frame for exaple Dail chart and I buy when the Stohastic (14,7,3) is in owersould and sell the pozition when the stohastic is in the owerbuy
    Best Regards
    Arpad

  25. Chandra sekaran says:

    It is a very good article. Many are suggesting stochastic only for higher time frame. But you are suggesting for lower time frame which is very good to note.

    Others are suggesting that we have to enter long and short only when stochastic crosses over 20 and below 80 respectively for long and short entry.

    But as per your suggestion, it is ON Crossing at both the ends. Which concept is correct ?
    Regards

  26. Ben Aqiba says:

    Hi Chris,

    thank you for your topic remake.
    It is very helpful as always.

    Thank you

  27. moaied suhail says:

    dear Chris,

    you have optimized the Heiken Ashi system to its best, great work.

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