Heikin Ashi candlesticks are a unique charting method which get heiken ashi strategy forex trading to your standard price chart on your trading terminal. The chart will resemble a typical Japanese Candlestick chart, however there are nuances that make reading the Heikin Ashi candles a bit different than the traditional candlestick chart. An untrained eye might not even recognize that this is not a standard Japanese Candlestick chart.
Each Heikin Ashi candle has an open, close, high and low. The opening level of the Heikin Ashi candle equals the midpoint of the previous candle. If you refer to the chart example above, it is clear that every new candle starts from the middle of the previous one. The highest point of a Heikin Ashi candle takes the actual high of the period. This could be the highest shadow, the open, or the close. The lowest point of a Heikin Ashi candle takes the actual low of the period. This could be the lowest shadow, the open, or the close.
The general idea behind the Heikin Ashi bars is that they smooth the price action. As a result, much of the noise shown in traditional Japanese Candlesticks is eliminated with Heikin Ashi charting. On the left side you see a chart composed of Japanese Candles. On the right side we have a chart made up of Heiken Ashi candles. The charts look pretty similar, however, the Heikin Ashi chart is smoother, don’t you think?
Referring to the colored circles on the chart you see the main differences between the two charts. Notice that the Heiken Ashi chart isolates some of the noisy price action. As a result, some Forex traders prefer to use the Heiken Ashi candles in order to isolate the noise on the chart, which can provide for a clearer analysis of the price action. If your goal is to catch longer and persistent trends, then using a Heikin Ashi chart will help you toward that end. Trend detection is one of the main functions of this type of charting style. The Heikin Ashi trading style puts an emphasis on persistent trends.