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A Heikin Ashi strategy which will get the full move of the entire trend is possible. You need to be aware of the top and bottom of a Heikin Ashi trend. Heikin Ashi candles show a clear loss of momentum at the top of a trend.
Heiken-Ashi, means "average bar" in Japanese. The Heikin-Ashi technique can be used in conjunction with candlestick charts if trading securities to spot market trends and predict future prices. It is useful for making candlestick charts more readable and trends easier to analyze. E.g. traders can use Heikin-Ashi charts to know when to stay in trades while a trend persists but get out when the trend pauses or reverses. Most profits are generated if markets are trending, so predicting trends correctly is necessary. The Heikin-Ashi Formula Normal candlestick charts are composed of a series of open-high-low-close (OHLC) candles set apart by a time series. The Heikin-Ashi technique shares some characteristics with standard candlestick charts but uses a modified formula of close-open-high-low (COHL): The Heikin-Ashi chart is constructed like a regular candlestick chart, except the formula for calculating each bar is different, as shown above. The time series is defined by the user, depending on the type of chart desired, such as daily, hourly, or five-minute intervals. The down days are represented by filled candles, while the up days are represented by empty candles. There are a few differences to note between the two types of charts, and they are demonstrated by the charts above. Heikin-Ashi has a smoother look because it is essentially taking an average of the movement. The price scale is also of note. The current price shown on a normal candlestick chart will also be the current price of the asset, and that matches the closing price of the candlestick (or current price if the bar has not closed). Because Heikin-Ashi is taking an average, the current price on the candle may not match the price at which the market is actually trading. For this reason, many charting platforms show two prices on the Y-axis: one for the calculation of the Heiken-Ashi and another for the current price of the asset. |
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