Heiken Ashi (or Heikin Ashi, Heikin-Ashi) is a method of representing the charts using the Japanese technique of balanced bars. When compared to traditional Japanese candlestick charts, Heiken Ashi charts are more easily read, provide clearer picture of the market, and allow easy trend spotting. What is good about this method is that it is included into the standard set of MetaTrader 4 indicators. You can find it there under the Custom submenu. I will not explain how to calculate these candlesticks here because MT4 does it all automatically for you and you do not have to worry about how those candles are drawn. Here I will tell you how to use Heiken Ashi in trading the trends. You can see an example Heiken Ashi chart:
As you see, the white bodies are the uptrend candles, and the red bodies are the downtrend candles. The upper shadows are usually absent on the downtrends, while the lower shadows are absent when the trend is going up. There are five Heiken Ashi scenarios for trends:
- The trend is normal. The rising white bodies signal an ascending trend, and the falling red bodies signal a descending trend.
- The trend is getting stronger. The rising longer white bodies with no lower shadows for an ascending trend; the falling longer red bodies with no upper shadows for a descending trend.
- The trend is getting weaker. The candle bodies become shorter and lower shadows occur in an ascending trend. In a descending trend — upper shadows occur.
- The trend consolidation. The small candle bodies with both upper and lower shadows.
- The trend is changing (not a very accurate signal). A very small candle body with long upper and lower shadows.
That is all you have to know to trade on the trends successfully if you are using Heiken Ashi charting method. But I also recommend reading another article on Heiken Ashi if you want to learn more about using the method.