Let me ask you…

Have you ever ever found it hard to trade using Japanese Candlestick charts?

There are too many green candles and red candles within the chart that you just just can’t determine should you ought to be a buyer or a seller!

That’s why in today’s post…

I need to make your life easier by introducing the Heiken Ashi candlesticks.

Here’s what you’ll learn:

• What’s the Heiken Ashi candlestick
• Why you must start using Heiken Ashi candlestick in your trading
• How not to make use of the Heiken Ashi (and what to do as a substitute)
• Heiken Ashi trading techniques to profit in bull & bear markets

Cool?

So first, let’s start with the fundamentals.

We could?

What’s the Heiken Ashi candlestick

The Heiken Ashi is a sort of candlestick that’s utilized in technical evaluation.

It looks very much like Japanese candlesticks that you have to have seen before.

But!

There are slight differences that you have to know.

For Japanese candlesticks…

Each candle is independent of the opposite, and also you’re just about just actual Open, High, Low, Close prices for the period.

Here’s what I mean:

You may be the every day chart, hourly or 1-minute chart.

But each candle isn’t affected by the opposite!

For Heiken Ashi, each latest candle is calculated based on the previous candle.

Here’s what I mean:

Heiken Ashi Close price is a mean of the particular O+H+L+C of the present candle!

Wherein…

The High is the utmost of H or O or C of the present candle.

The Low is the minimum of L or O or C of the present candle.

The Open price is half of the previous candle’s Open price + the previous candle’s Close price.

Which means that a bullish and bearish candlestick is barely different in Heiken Ashi as well.

To summarize things…

Here’s a transient explanation on what makes the 2 different:

For Japanese candlesticks:

• A bullish candlestick has its closing price above its opening price
• A bearish candlestick has its closing price below its opening price

For Heiken Ashi candlesticks:

• A bullish candlestick has its closing price above the center of the previous candle
• A bearish candlestick has its closing price below the center of the previous candle

Is smart?

So, now that you realize the differences between a Japanese Candlestick and a Heiken Ashi bar…

Let me teach you “why” you’d want to think about trading with the Heiken Ashi.

Sounds good?

Then carry on reading!

Why you must start using Heiken Ashi candlestick in your trading

In case you’re a newbie trend trader and might’t discover the trend for nuts…

Then the Heiken Ashi candlesticks will enable you loads.

Here’s a fast example!

Take a look at this Japanese candlestick chart of USDJPY:

Now let’s compare that with the Heiken Ashi chart of the identical USDJPY:

Now tell me…

Which means that you can see the trend at a look?

Without having to second guess…

You may clearly see trends on the Heiken Ashi chart of the USDJPY!

Still not convinced?

Then let me show you more examples on how these perform in multiple trading conditions…

Uptrend

You may see the uptrend characterised by these green candles with:

• Big bodies
• No lower wick
• As a rule, they’ve an extended upper wick

Downtrend

Over here you possibly can see small pullbacks or downtrends, by red candles with:

• Big bodies
• No upper wick
• Often have an extended lower wick

Reversal

Now, how do you tell that the market is about to reverse?

Take a look at these candles with:

• Super long upper and lower wicks
• But very small bodies

They appear exactly like a doji reversal candlestick.

It’s really straightforward, right?

You just about get a less noisy chart and look beyond minor pullbacks in a trend which prevents evaluation paralysis.

This implies you need to use the Heiken Ashi as a trend filter for the markets and choose if you desire to go long or sell short!

But similar to every other tools and ideas on the market, it’s not the holy grail.

There are some strengths, while there are some weaknesses.

Since I’ve shared what the Heiken Ashi is able to, I’ll now share with you what it’s not.

Curious?

Then let’s move on…

How not to make use of the Heiken Ashi (and what to do as a substitute)

Recall…

Heiken Ashi’s Close price is a mean of the particular O+H+L+C of the present candle.

Its Open price is half of the previous candle’s Open price + the previous candle’s Close price.

This implies as a scalper on the 1-min timeframe…

You don’t need to be using the Heiken Ashi candlesticks.

Why?

Because ts Open and Close prices are calculated based on average prices which take time to form!

So, you’ll never have the ability to make quick scalping decisions!

In case you’re a scalper who needs the most recent price…

It’s best to persist with Japanese candlesticks.

So, to unlock Heiken Ashi candlesticks’ full potential, do that as a substitute…

Trade using Heiken Ashi on the upper timeframes, just like the hourly timeframe and above.

You should use then use it to simply discover the trend and hop right into a trade (which I’ll explain more about next).

Moving on…

Heiken Ashi trading techniques to trade with the trend in bull & bear markets

On this section…

I would like to share with you the Heiken Ashi trading techniques together with examples so you possibly can begin to crush your trades.

At the same time as a newbie trader!

So let’s get straight to the purpose…

The best way to use Heiken Ashi for bullish trend continuation

There are 4 parts to this bullish trend continuation technique:

1. Discover the trend on the upper timeframe using Heiken Ashi candles
2. Wait for pullback into an area of value using 20 & 50 EMAs on the lower timeframe
3. Go long on a legitimate entry trigger
4. Stop loss 1 ATR below recent swing low and take profit before previous swing high

Let me explain…

Firstly… Discover the trend on the upper timeframe using Heiken Ashi candles.

On the right-hand side…

You may see USDJPY is clearly in an uptrend at this stage because the Heiken Ashi candles are green, with big bodies and little to no lower wicks.

Nonetheless, the worth has moved quite a bit and also you don’t need to jump in straight, in case it makes an enormous collapse against you.

So, what you desire to do is that this…

Secondly, wait for pullback into an area of value using 20 & 50 EMAs on the lower timeframe.

At this point…

The worth has pulled back throughout the EMAs and resting right above the 50 EMA.

That is when the market is “taking a break” and the world between 20 EMA and 50 EMA serves as an area of value for you to begin searching for an entry trigger.

Thirdly, go long on a legitimate entry trigger.

Your entry trigger might be the large, green-bodied candlestick that has little to no lower wick after the worth bounced off the 50 EMA.

Go long on the following candle after you see this candle form.

Why is that big green candle entry trigger?

Recall that the closing price of a Heiken Ashi candle is the typical of the particular O+H+L+C of the present candle.

And despite being a mean value (which might have been affected by highs and lows of the day), it still closes above the previous Heiken Ashi candle’s high.

This implies there may be momentum behind the move, so it serves as a legitimate entry trigger for a bullish trend continuation.

And eventually, stop loss 1 ATR below recent swing low and take profit before previous swing high.

Your stop loss will simply be 1 ATR below essentially the most recent swing low (below the 50 EMA).

If you desire to learn more about stop loss hunting secrets, you possibly can take a look at this video. I’ll not be diving into too many details here.

You’ll also need to take profit before the previous swing high.

You don’t need to be too greedy together with your profit goal should you’re just starting with this easy trend continuation technique.

Next…

The best way to use Heiken Ashi for bearish trend continuation

For a bearish trend continuation, it is just the other:

1. Discover the trend on the upper timeframe using Heiken Ashi candles
2. Wait for pullback into an area of value using 20 & 50 EMAs on the lower timeframe
3. Go short on a legitimate entry trigger
4. Stop loss 1 ATR above recent swing high and take profit before previous swing low

Firstly, discover the trend on the upper timeframe using Heiken Ashi candles.

Using just the Heiken Ashi candles on the Dailly chart, you possibly can see the worth is currently bearish with big, red-bodied candles, with little to no upper wicks.

Next…

Secondly, wait for pullback into an area of value using 20 & 50 EMAs on the lower timeframe.

Let the worth come into the world of value throughout the 20 EMA and 50 EMA.

You may see that even throughout the 20 EMA & 50 EMA, there’s a doji that formed.

Which means that the short-term bullish candles are about to lose momentum and the market is about to show bearish.

Thirdly, go short on a legitimate entry trigger.

This latest red Heiken Ashi candle with no upper wick but a protracted body with its closing price much lower than the previous candle is your entry trigger.

You’ll go short on the open of the following candle.

And eventually, stop loss 1 ATR above recent swing high and take profit before previous swing low.

Having your stop loss 1 ATR above the previous swing high gives your trade some space to “breathe”, so that you don’t get stopped out of your trade too early.

You may then take profit before the previous swing low.

Nonetheless…

You don’t need to set your profit goal beyond the swing low since the market is more more likely to reverse altogether without touching it.

Is smart?

So, that’s it!

That’s the way you trade the Heiken Ashi across different market scenarios!

With that said, let’s do a fast recap on what you’ve learned today.

We could?

Conclusion

To summarize all the things on this training guide…

Here’s what you’ve learned today:

• Heiken Ashi candlesticks’ OHLC prices are calculated otherwise from Japanese candlesticks
• Use Heiken Ashi candlesticks as trend filters to know when to be a buyer or seller
• Avoid using Heiken Ashi for scalping because the candles take time to form and usually are not exact open or close prices of the period
• Heiken Ashi trend continuation techniques to profit in each bull and bear markets

Now over to you…

Have you ever used Heiken Ashi in your trading before?

If not, will you give the Heiken Ashi a shot in your trading?

Let me know within the comments below!