Heiken Ashi indicator (Heiken Ashi) is popular all over the world. In this article, we will look at its features, how to use it in trading, on which currency pairs and timeframes, what are the advantages and disadvantages of the Heiken Ashi indicator.
Heiken Ashi makes it easy and simple visually determine the direction and strength of the trend… The Heiken Ashi indicator is very similar to ordinary Japanese candlesticks, but it has its own peculiarities, the main one of which is that it provides us with an average price chart. Heiken Ashi candles are calculated based on Japanese candlesticks according to the following formulas:
- Open point = (Open of the previous candle + Close of the previous candle) / 2 – that is, the average price between the open and close points previous candles.
- Point Close = (Open + Max + Min + Close) / 4 – the arithmetic mean between the points of opening + closing + min + max the current candles.
- Min =
- Max =
As you can see, Heiken Ashi indicator provides us with a smoothed, averaged price chart. This is especially convenient when trading low TFs from M5 to H1. This indicator is mainly intended for them. As can be understood from the formulas, Heiken Ashi is a little late, presents a graph with a delay.
And since the indicator gives trading signals with a lag, it is considered that it is not very suitable for trading on TFs above H1. The second argument in favor of using the indicator on timeframes no higher than one hour is that the chart based on Heiken Ashi is averaged, the indicator for us removes market noise, which is in abundance on the lower TFs, and we see a more readable graph.
Thus: the Heiken Ashi indicator reveals itself best when trading within the day.
First, let’s figure out what signals the indicator gives us, and then consider an example of a simple trading strategy based on it. By default, the colors of the indicator bars are as follows:
Bullish Bar – White
The bearish bar is red.
The tails of the bars also have their own meaning – the long ones are directed in the direction of the trend, the short ones can simply be ignored, they do not matter. When there is a series of candles of the same color, we can talk about the presence of a trend. White candles – bullish trend, red – bearish.
The larger the body of the Heiken Ashi candlestick, the stronger the trend at the moment. When the trend weakens, the body of the candlestick decreases and the shadows increase.
In addition to the presence, direction and strength of the trend, Heiken Ashi can also prompt the moment of the trend change.
There are bullish bars, there are bearish bars, and there are reversal — these are bars with a small body and long shadows at the top and bottom… When such a bar appears, the current trend can be expected to change.
As you can see, using the Heiken Ashi indicator, you can determine the direction, strength and moment of the trend change.
Of course, this indicator is far from the “Grail” and, like any other, periodically gives false signals. Therefore, trading based on the readings of the indicator alone will not bring profit. It is necessary to use the indicator in conjunction with others. Very often, Heiken Ashi is used in tandem with a stochastic. Here is an example of a simple strategy based on these indicators.
When the Heiken Ashi bars indicate the beginning of a new trend, look at the stochastic. If the stochastic leaves the overbought / oversold zone at this time, then the signal is considered confirmed and we enter the market. Without fail, we add strict rules of money management and that’s it, the simplest trading strategy is ready.
Download Heiken Ashi not required, it is already preinstalled in the Metatrader terminal.
Heiken Ashi indicator – a handy assistant to determine the direction and strength of the trend. In addition, you can determine the moment of a possible trend reversal. But you shouldn’t trade based only on the indicator readings. It is much better to use Heiken Ashi in combination with other indicators or technical analysis methods. The indicator shows itself best of all when trading intraday on timeframes from M5 to H1.
By the way, the indicator is, in principle, suitable for trading on any currency pairs, but cross rates with the Yen are preferable: EURJPY, GBPJPY, CADJPY, etc. This is due to the high volatility of these crosses and, according to the test results, the Heiken Ashi indicator works better here …