Mon. Nov 28th, 2022

Fxtriangle | Market analysis | Managed trading

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How to Trade Using Heikin Ashi?

2 min read

The Heikin-Ashi technique averages price data to make a Japanese candlestick chart that filters out market noise. The purpose of Heikin-Ashi charts is to filter noise and supply a clearer visual representation of the trend.

  • Green candles with no lower shadow indicates a robust uptrend. Green candles signify an uptrend, one can add long position and exit short positions.
  • Candles with a little body surrounded by upper and lower shadows indicates a trend change whereas risk-loving traders might buy or sell here, while others will await a confirmation before going long or short.
  • Red candles indicate a downtrend: you would possibly want to feature to your short position and exit long positions.
    Red candles with no higher shadows identify a robust downtrend: Stay short until there is a change in trend.
  • The averaged open and shut help filter a number of the market noise, creating a chart that tends to spotlight the trend direction better than typical candlestick charts.
  • Long down candles with little upper shadow represent strong selling pressure. Long up candles with small or no lower shadows signal strong buying pressure.
  • A long hollow Heikin-Ashi candlestick shows strong buying pressure over a two day period. The absence of a lower shadow also reflects strength.
  • Small Heikin-Ashi candlesticks, or those with long upper and lower shadows show indecision over the last two days. This often occurs when one candlestick is filled and therefore the other is hollow.

The Heikin-Ashi technique uses a modified formula supported two-period averages. This gives the chart a smoother appearance, making it easier to spots trends and reversals, but also obscures gaps and a few price data. The main advantage is that the charts are much “smoother” looking, which helps to more easily identify the trending direction.

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