What Is a Heikin Ashi Chart and How Do I Use It?

What is your approach to Heikin Ashi？

Let's talk about how to use and understand a Heikin Ashi candlestick chart now that you know how to calculate Heikin Ashi candlesticks.

The purpose of a Heikin Ashi chart is to filter out market noise.

Because noise is filtered, the naked trend is visible.

The Heikin Ashi candlesticks will have lower shadows (wicks) than a conventional Japanese candlestick since they are calculated using averages.

The smaller (or shorter) the shadow (or wick) on a Heikin Ashi candlestick, just like with conventional Japanese candlesticks, the stronger the trend.

A strong UPTREND is indicated by green candles with no lower shadow.

A strong DOWNTREND is indicated by red candles with no upper shadow.

Technical traders utilize Heikin Ashi charts to IDENTIFY: Trend DIRECTION

STRENGTH OF THE TRENCH

If you want to catch trends and ride them for as long as possible, a Heikin Ashi chart is a good tool to master.

How to Identify Trend Direction Using Heikin Ashi

A Heikin Ashi chart uses color-coded candles to depict the direction of a trend.

A green candle indicates that the trend is upward.

The trend is DOWN, as indicated by a red flame.

How to Identify Trend Strength Using Heikin Ashi

By analyzing the shadows on a Heikin Ashi chart, you may determine the strength of the trend (or wicks).

Many of the green candles had no lower shadow or wick, as you can see.

For the red candles, it's the other way around. There are no higher shadows or wicks on the majority of them.

These candlesticks do not have a shadow in the trend's OPPOSITE direction.

When there isn't a shadow, you're in a strong trend.

To establish trend strength on a Heikin Ashi chart, the main thing to look for is shadowless or wickless candlesticks opposite the trend.

“Shaved candles” are candlesticks that have no shadow or wick on one end.

Each sort of shaved candle has a different name depending on which end lacks a shadow.

The candle is called a “shaved bottom” if there is no lower shadow/wick, also known as “no tail.”

In our opinion, “shaved butt” would have been a better term.

The candle is called a “shaved head” if there is no upper shadow/wick, also known as “no head.”

Technically, the color of the candle doesn't matter as long as it doesn't have a tail or head, but since we're searching for trend strength, we want to see shaved bottoms that are green and shaved heads that are red.