Heiken Ashi candle has a body, as well as an upper and lower candlewick, making it similar to Japanese Candlesticks. However, they begin from the middle of the bar before it, and not from the level where the previous candle closes. This is the key distinguishing factor between the two charting styles.
Heiken Ashi candlesticks are exceptional charting methods which get attached to your standard price chart on your online trading platform. It resembles a typical Japanese Candlesticks. However, reading the Heiken Ashi candles are quite different from the traditional candlesticks chart.
Using Heiken Ashi
In case your goal is to catch long and persistent trends, then Heiken Ashi is the best chart that you can make use. One of the functions of Heiken Ashi is trend detection. It is a trading style which emphasizes the persistent trends.
Small corrections, as well as consolidations, are usually left behind and they are barely visible on the chart. Whenever directions change on a Heiken Ash graph, the price most likely begins a new move. This is effective in distinguishing between potential and the end of a currency pair trend.
When using the Heiken Ashi chart, it is advisable to use a trailing stop as a management tool in a trending market. Consequently, many traders use a combination of smoothening benefits of the Heiken Ashi chart with a trailing stop indicator to get the most out of a trending market condition.
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Another way through which Heiken Ashi is used is by looking for chart patterns and for applying price action rules. Most of the time, this works in the same way just like the traditional Japanese candlesticks. However, Heiken Ashi chart pattern breakouts are sometimes more dependable than the traditional candlesticks charts.
Heiken Ashi Trends
By making use of the Heiken Ashi Trends, you are in a position of confidently distinguishing strong trends from unsustainable price actions.
Bullish Heiken Ashi Trend
The bullish Heiken Ashi trend is similar to the normal Japanese candlestick trend. They are built primarily by bullish candles and does not have lower candlesticks. Whenever there is a rise in the price, the price action creates very little or no lower shadows.
The Bearish Heiken Ashi Trend
The bearish Heiken Ashi trend has similar functions to the bullish one, though in the opposite direction. This implies that it is created by bearish candles. It is also worth noting that a strong bearish trend on the Heiken Ashi trend has little or no upper candle shadows.
Trading with Heiken Ashi
Heiken Ashi trading is very powerful when used in combination with price action analysis. When using them, look for support and resistance levels and vital swing points. It is also advisable to bear in mind that these could result in future turning points on the chart. The chart and candle patterns are always considered for the opening and closing trades.
Before entering a trade, ensure to make use of the stop loss which has conformed to a level. Always replace the regular stop with a trailing stop order whenever the price moves in your favor. Additionally, you need to hold your trades until the price action gives you clues to a potential trend reversal.
An important thing that you need to consider is that if the Heiken Ashi price action creates a relatively large candle, then it is the right time to exit the position.
Conclusion
Heiken Ashi is effective in assisting a trader to get hold of bigger trends than the small price move. The candles also lay a lot of emphasis on persistent tendencies than small fluctuations. Additionally, because Heiken Ashi naked trends, they can easily be pursued with a Trailing Stop order. Heiken Ashi candlesticks offer chartists with versatile tools which can filter noise, foreshadow reversal as well as identity classic chart patterns.
By Taylor Wilman