What Is Heikin-Ashi and How to Trade with It?

Category: Technical Analysis | Monday, February 25th, 2008

In forex or stock market, we can make or lose money when the price goes up and down. We need to be able to predict the direction of the market. Different traders do it using different methods but for most traders, technical analysis of the price charts is the easiest way. So they spend a lot of time to learn technical analysis.

In fact, technical analysis was invented and introduced by Japanese traders and by the invention of the candlesticks. Those who are familiar with the candlestick charts know that candlesticks are the best and fastest tools to understand the condition of the market and the psychological situation of the buyers and sellers.

Japanese traders never stopped improving their technical analysis methods and tools. They worked hard and tried to improve the technical analysis. Heikin-Ashi chart that came after the candlestick chart is one of the several different achievements of Japanese traders.

I don’t say that you can predict faster using the Heikin-Ashi chart, but it is much easier because it eliminates a lot of noise and so it prevents you from taking many of the false signals.

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

Heikin-Ashi chart looks like the candlestick chart but the method of calculation and plotting of the candles on the Heikin-Ashi chart is different than the candlestick chart.

In candlestick charts, each candlestick shows four different numbers: Open, Close, High and Low price (It is recommended to learn the candlesticks first) and each candlestick is independent and has no correlation with the previous candlestick.

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

1- Close price: the close price in a Heikin-Ashi candle is the average of open, close, high and low price.
2- Open price: the open price in a Heikin-Ashi candle is the average of the open and close of the previous candle.
3- High price: the high price in a Heikin-Ashi candle 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 candle is chosen from one of the high, open and close price of which has the lowest value.

So Heikin-Ashi candles are related to each other, because the close and open price of each candle should be calculated using the previous candle close and open price and also the high and low price of each candle is affected by the previous candle. So Heikin-Ashi chart is somehow like a moving average, but it is much more than that, because it gives more information.

Why Heikin-Ashi is Better for Trading?

As I already mentioned, Heikin-Ashi eliminates the market noise and so it is much better for trading, both for reversal and also continuation signals to follow the trends. This indicator is also great for volatile currency pairs like GBPJPY.

Lets see how the Heikin-Ashi chart looks like and compare it with the candlestick chart. The upper part is Heikin-Ashi chart and the lower part is candlestick chart:

Heikin-Ashi candle - Heikin-Ashi chart

Different candles in a Heikin-Ashi chart:

1- Bullish candles:

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

2- Bearish candles:

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

3- Reversal candles:

Reversal candles in the Heikin-Ashi charts look like Doji candlesticks. They have no or very small bodies, but long upper and lower shadows. Look at the reversal candles in the below chart:

How can you use the Heikin-Ashi chart in your trades?

Heikin-Ashi is the main thing that some traders use. Heikin-Ashi is great for trading all currency pairs, especially volatile ones like GBPJPY and EURJPY. It is a strong and reliable indicator for intraday trading and scalping with small time frames like 15min, 5min and even 1min. On the other hand, it is also perfect to ride the big and continuous trends in the big time frames like daily and 4 hours.

Heikin-Ashi is also a good indicator and trading tool for new traders, especially those who have a lot of problem with controlling of their emotions. Heikin-Ashi helps you to be patient and take only the good and profitable trade setup. It eliminates the market noise and forms strong and profitable trade setups.

However, like any other indicator and trading system, you have to know how to use this indicator. To have the best result, I have combined Heikin-Ashi with some other critical and important indicators.

Sign up for our Heikin-Ashi training course and… :

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Further Reading:

 
60 Comments:
post a comment
Comment by pol
2008-02-26 01:21:08

Hello,
I hope that you feel yourself better this last days.
Please a little question.Why do you use the stoch.settings at 14,7,3?
Is this a ussable setting who works good?I use always 8,3,3 or 14,3,3
Sorry for my bad English.
Thanks

Comment by Vahid
2008-11-08 10:50:45

Pol,

I just wanted to make the Stochastic a little slower to have less false signals. If you use the settings that make it faster and you are happy with it, you can use them.

 
 
Comment by Ikpo
2008-02-26 12:59:49

Hello
There is no Heikin-Ashi chart in my trading platform, I use Fx sol
Please, what do i do.
Thanks
Ikpo

Comment by Vahid
2008-11-08 10:50:05

Ikpo,

You have to ask them to add it to the platform. This is what they have to do it sooner or later because Hiekin-Ashi is getting popular.

 
 
Comment by olanrewaju
2008-02-27 06:54:54

thanks vahid again , no knowledge is a waste. enjoy the lesson

 
Comment by ejissupreme
2008-02-29 00:14:04

Vahid, what is goin on?

we don’t seem to see your signals again

i need to hear your comments on the market for next week. they look good when i combine with my own analysis. Particularly on GPBUSD and EURUSD.

Thanks for your informative articles

 
Comment by Raymond Saunders
2008-03-03 18:34:21

Hello Vahid,
What charting software do you use in the Japanese Candlestick and Heikin Ashi examples above to plot the charts in seperate windows.? At present I am using MetaTrader 4. This plots the candlesticks and Heikin Ashi in the same window on top of each other and it is difficult to see the signals.

Comment by Vahid
2008-11-08 10:49:01

Raymond Saunders,

I use the CMC Markets platform which is called MarketMaker. You can find the same facilities with the RealTimePro platform too.

Comment by Mustaffa Kamal
2008-12-08 03:32:00

Hi,

Can u pls explain more detailed about Heikin Ashi, and how to download if I am using CMC MARKETMAKER.

Thanks

Comment by Vahid
2008-12-09 12:25:13

Hi Mustaffa,

CMC MarketMaker has a good Heikin Ashi. Just go to the price chart properties and change Candlestick to Hekin Ashi.

 
Comment by Mustaffa Kamal
2008-12-20 03:41:58

Hi Vahid.

Thanks for your useful inform and useful. Once again thanks.

 
Comment by Mustaffa Kamal
2009-01-15 08:34:31

Hi vahid,

I look like to learn more about TAOS is it the term is Alchemy Of Speculation, Can u pls explain about this.

Thanks

Mustaffa Kamal

 
Comment by Vahid
2009-01-15 17:47:07

Unfortunately I know nothing about it.

 
 
 
 
Comment by Rory
2008-03-09 08:31:04

What’s the status on future market analysis?. Have not seen any updates on the Forex market in a while.

 
Comment by Akbar
2008-04-01 13:50:45

Hello Brother,

May I know how to construct and how to interprete the Heikin-Ashi chart ? I shall be highly obliged. Thanks.

Akbar.

 
Comment by HUSSAIN
2008-04-05 11:28:16

THANKS . YOU ARE DOING A WONDERFUL JOB OUT THERE . YOUR INFOMATION ARE SOLID AND VERY RESOURCEFUL . MORE GRESE TO YOUR ELBOW

 
Comment by seelan
2008-04-23 10:22:09

Informative and excellant for beginners like me

 
Comment by Isaac Raymond
2008-05-15 04:55:38

Hi Vahid,

I would like to know if there is a difference between the “Heikin Ashi Smooth,”
and the “Heikin Ashi ” .

Is there different settings on the Heikin Ashi.?

Can you recommend a platform that has the Heikin Ashi ?

Is it recommended to be used on Commodities and Futures?

It appears to be a very simple / easy way to trade without the noise.

I live in Melbourne — Australia

Thanks

Best Regards

Isaac

Comment by Marian
2008-11-09 17:39:36

Think or Swim has 3 kinds of candlestick charts. The regular and 2 kind os Heikin-Ashi. You can trade anything on their platform stock, option, futures, forex etc.

They are extrememly cheap and it is an awesome platform. thinkorswim.com I do not use the web based version but download the software, They listen to their customers and are constantly upgrading the software.

Marian

 
 
Comment by Tosin
2008-05-19 05:51:26

Hi Vahid,

I just came across your wonderful site today and I have gone through almost all the topics you have touched on Forex trading.

I must say that you are doing a great job, Kudos to you.

I am interested in Forex and I have learnt a great deal from you site today.

The problem I have is my job will not really allow me to trade while at work, can you recommend a legitimate and reliable Forex Broker to me to help me manage my account.

Your assistance will be greatly appreciated.

Thanks and God bless you.

Tosin

Comment by Vahid
2008-11-08 10:47:16

Hi Tosin,

Thanks for your comment.

There is no reliable broker that manage your account for you. In fact you have to be so careful about those who claim that they can work with your money and increase it. Also do not try the auto-trading systems (robots).

The only thing I can recommend is learning the forex completely and then spending some time to trade. If you don’t have time, you can work as a swing trader and focus on one currency pair. So you will not have to spend more than 15 to 30 per day to check the charts and take the proper position if you see a signal.

 
 
Comment by Nasir
2008-06-09 23:23:00

Hello

I like to learn forex trading. I am equity option trader.
Where do I start?

Thanks.

Nasir

Comment by Vahid
2008-11-08 10:46:48

Hi Nasir,

Thanks for your email.

I strongly suggest you to read the “Forex Patterns & Probabilities” by Ed Ponsi.

You can also take a look at the articles I have at http://www.forexoma.com/learn-more/

It is not completed yet but there are some informative articles there.

 
 
Comment by tony
2008-06-16 11:52:16

Hi,
I tried to sign up for your blog posts by email, but it wouldn’t let me. Check it out so I can get it. I usually trade the grain market but haven’t been using candlesticks. I think I could learn something from you.

Thanks,
Tony

 
Comment by kishor
2008-08-20 04:04:26

I intrested in learn technical study for chart. i have basic knoledge about it. but i want study in deep. please suggest me.

Thank You

 
Comment by Shawn Casey
2008-08-22 17:58:23

Hi,
Just wanted to say the Heikin-Ashi info was very informative and a good read. Do you know if there are any internet charting sites that have Heikin-Ashi? If not I will probably just get Meta Trader.
Thanks
Shawn from Canada

Comment by Marian
2008-11-09 17:46:02

check out thinkorswim.com download the software and open an account (it does not have to be funded right away) and you can use their platform for about 2 months and paper trade to get use to it, It is so powerful and they have Heikin-Ashi and so much more. I have been with them for 9 months now and every month they improve and add things to their platform and it is so cheap trading with them their prices are great and you can trade stock,. option, futures, forex etc.
Good luck, Marian

 
 
Comment by tymen
2008-09-01 11:02:44

Hello Vahid,
Is there a difference between the heikin ashi and the smooothed heikin ashi?

If so, how would you trade the smoothed version?

 
Comment by Christian
2008-09-15 10:10:39

Send more article to my inbox on other indicator and chart showing and analysing buy or sell signal. lik ur teaching

 
Comment by Israel
2008-11-07 22:59:32

This could be very helpful to those of us still groping in the forex dackness. I appreciate this alot.
I remain very thankful.

Comment by Vahid
2008-11-08 10:45:50

Thanks Israel.

 
 
Comment by Esemayon
2009-01-10 01:42:54

Thanks. I grab one or two things from your analysis of Heiken Ashi indicator.

More grease to your elbow.

Regards.
Esemayon.

 
Comment by Isaac
2009-01-27 04:17:53

Hi Vahid,

Thanks for the great website, I can only afford to trade intraday at the moment (due to stop loss being smaller). I have lost a lot money trading Futures and Options following so called GURUS.I am not really confident in taking an
overnight position at the moment.
I am very interested in the above system, with the Hieken Ashi candlessticks, with the 5 or 15 minute time frame, but how do calculate a stop loss ?,
as this is my biggest problem, I always get stopped out.

Thanks for the great service

Best Regards

Isaac

Comment by Vahid
2009-01-27 08:13:50

Hi Isaac,

Thanks for your comment.

I have another article about stop loss setting. I think it can help you:
http://www.forexoma.com/where-is-the-best-place-for-stop-loss-and-limit-orders/

Best regards,
Vahid

 
 
Comment by Ad
2009-01-28 19:51:03

What is the advantage of trading forex over e-mini futures? Does the forex trend more consistently/less noise?

 
Comment by z4wil
2009-02-02 20:52:07

Well, Heikin-Ashi is great visual tool :)

I still using this candle for my trade, and it’s better for GBP/JPY with triple time frame 5M-30M-H4…very good….!

 
Comment by jonathan
2009-02-07 21:26:01

Thanks a million times for ur wonderful teachings of the forex market, you must have been born with a forex chart from Japan, and so became d best teacher of forex since this 21st century, an award for u man? why not….. more power to your elbow. please how do i use the SMA40 that changes color for the next signal, mine does not change color at all. please help

Comment by Vahid
2009-02-08 10:27:03

Hi Jonathan,

Thanks for your attentions.

The regular moving averages we have in MetaTrader don’t change the color when they change the direction. You should use FX Snipper MA:
http://www.forex-tsd.com/indicators-metatrader-4/578-moving-average-8.html#post69014

Best regards,
Vahid

 
 
Comment by jonathan
2009-02-08 19:58:01

thank u very much

 
Comment by jonathan
2009-02-19 10:20:38

Please Vahid, where and how do i place my stop loss if trading with heiken ashi?

Comment by Vahid
2009-02-19 10:47:55

Hi Jonathan,

You have to use the candlestick chart to choose a proper place for your stop loss. Heikin Ashi is not suitable for that.

Best regards,
Vahid

 
 
Comment by john
2009-03-02 23:28:31

hi vahid i have read your articles and they r helpful but wat i havent understood which trade platform do u use cos i would like to use it too.another thing which technical indicator do u think gives the right signal?

 
Comment by Tariq
2009-03-04 16:09:12

Thanks vahid, really nice teaching about heikin ashi.GOD bless you for that nice work.Ameen.

 
Comment by kev
2009-03-26 01:31:16

Hi,

Great article, very illuminating.
I wanted to know if using the 30minutes chart with heikinAshi is good or is it a big time frame.
I normally use VT Traders HeikinAshi candles.

Thanks.

Comment by Vahid
2009-03-26 07:05:56

Hi Kev,

Thanks for your comment.

Heikin Ashi can be used in any time frame. It depends on you but you should consider that it is delayed.

Best regards,
Vahid

 
 
Comment by Misterplumber
2009-04-05 05:56:56

I believe there may be an error in #4 of your explanation of a H-A low.
Here what you wrote:

4- Low price: the high price in a Heikin-Ashi candle is chosen from one of the high, open and close price of which has the lowest value.
^
Shouldn’t this say low price?

Great Explaination otherwise.

Comment by Vahid
2009-04-08 10:53:27

Hello my Friend,

Absolutely! Thanks for your help. I already fixed it.

Best regards,
Vahid

 
 
Comment by Gary
2009-04-12 22:44:01

I have think or swim. It has fast, slow, and full stochastic charts with a K period, D period, and a smoothing. I have used every combination possible on all three using your 14, 7, 3 and cannot get a stochastic with two smooth lines like your sample shows. It also allows you several choices for what to use for high, low, and close. What number is for what period and what type of stochatic are you using?

Thank you.

 
Comment by Gary
2009-04-14 23:29:43

You mention the signals given by candlestick and Heikin Ashi candlesticks. Would you please describe what constitutes a signal by both charts? Thank you.

Comment by Vahid
2009-04-15 19:40:45

Hi Gary,

Some of the screenshots on this page include both ordinary and Heikin-Ashi candles:
http://www.forexoma.com/images/posts/forex2/heikin-ashi-5.png
http://www.forexoma.com/images/posts/forex2/heikin-ashi-6.png
http://www.forexoma.com/images/posts/forex2/heikin-ashi-7.png
http://www.forexoma.com/images/posts/forex2/heikin-ashi-8.png

The vertical lines we have on both candlestick, Heikin Ashi and also Stochastic show what kind of correlation we need on all of them to have a signal.

Best regards,
Vahid

 
 
Comment by Ron
2009-07-07 18:31:11

Great stuff sounds very interesting.I prefer use Fisher Transform as my indicator,it’s much cleaner and works well with Heikin Ashi charts,also to make up for the lag between candle and HA I will go down a timeframe on the HA say ,15m.Candle Charts and 10m. Heikin Ashi charts.Works perfect.

Comment by udhaya
2009-10-30 00:29:24

Hi Ron,

how can we use this fisher transform , where we can download this indicator

Thanks
Udhaya

 
 
Comment by Chu Van
2009-10-21 10:30:06

That’s great. Thanks for sharing!

 
Comment by Gaby
2010-02-24 17:06:35

Hello Vahid
thank you for the very good explanation. On my metatrader platform I can put Heiken Ashi. Then on the chart the candles come along with white sticks or red sticks within the bodies or sticking out as sometimes quick thick shadows. It seems to me that red is related to bearish or sellling activities. But often the red is to be seen within a bullish candle. How can I interpret this?
Thanky you for your comment.
Gaby

Comment by Vahid
2010-02-26 09:21:17

Hi Gaby,

Heikin Ashi is a delayed indicator. That is why when - for example - market changes its direction and it goes up and regular candlesticks become bullish, Heikin Ashi is still red.

 
 
Comment by Charis
2010-02-28 03:00:29

great easy understandable lessons about Forex!
I actually have used in the forex demo accound all the tips and lessons from this lesson and other ones as well and i made , i (repeat in the demo accound, not the real one!!!!!!!!!) 1000 dollars with 10% loss and I can’t wait for the weekend to pass and start again on monday!
Thank you so much!
For the people who are taking Forex seriously and want to learn and make a profit, your tips and lessons are really valuable to us!!!

 
Comment by Sri Hari
2010-03-08 23:38:46

Hi Vahid,

This is the best explanation i have seen about Heikin Ashi so far. Keep up the good work.

One important information is that you have to use this strategy only on high volatile pairs like EUR/JPY and GBP/JPY in shorter time frames (<15 Mins) as Heikin Ashi gives a delay of 2-3 candles as explained above. (The above suggestion is based on my personal experience)

Thanks,
Sri Hari

 
Comment by Joji
2010-05-12 10:23:02

Hi Vahid,

I learned a lot about FX today. Great Article. Thank you for your contribution.

 
Comment by Thomas
2010-05-12 20:47:52

Hi Vahid,

Thank you. I am a new to FX but your simple explanation has taught me a lot.
I was wondering, by using this Heikin Ashi along with the Wilder’s Smooth MA you explained earlier, can we determine when to buy and sell? Do we need any more things?

Thanks so much for your help.

 
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