Heiken Ashi

Heiken Ashi

The Heiken Ashi indicator represents a specific type of candlesticks which differ from those we are used to seeing at the Japanese candlestick chart. “Heiken Ashi” can be translated from Japanese as “a bar in the middle”. This approach was developed back in the 1700s by Munehisa Homma.

How the Heiken Ashi indicator works

The main aim of this indicator is to filter out market noise. As you remember, Japanese candlesticks simply visualize the price’s opening, closing, highest and lowest levels during a particular period of time. The Heiken Ashi has a specific formula in place:

Heikin-Ashi Open = [Open (previous bar) + Close (previous bar)]/2

Heikin-Ashi Close = (Open+High+Low+Close)/4

Heikin-Ashi High = Max (High, Open or Close)

Heikin-Ashi Low = Min (Low, Open or Close)

The indicator, of course, counts everything automatically. Yet, you need to understand where the Heiken Ashi candlesticks come from and realize that if the Heiken Ashi spiked, it doesn’t mean that the price actually visited that level. The indicator simply shows the trend.

Here's a usual Japanese candlestick chart:

Japanese candlestick chart

And here are Heiken Ashi candlesticks for the same period of time (the price chart itself is in the form of a line chart):

Heiken Ashi candlestick chart

If you compare the simple candlestick chart with the Heiken Ashi, the latter looks smoother because it takes an average of the price movement. Notice that Heiken Ashi candlesticks tend to have a bullish color (whichever you choose in the settings – let’s make it green) during an uptrend, and a bearish color during a downtrend (let it be red). The current price of the Heiken Ashi may differ from the current price of a financial asset you are trading. There also are no gaps in the Heiken Ashi chart. 

How to implement

To add the Heiken Ashi indicator to a chart, click “Insert”, choose “Indicators” and then “Custom”. You will then be able to pick out “Heiken Ashi”.

How to trade using Heiken Ashi

It’s possible to tell a lot about the market by observing Heiken Ashi candlesticks:

  • Bullish candlesticks with no lower shadows signal a strong uptrend.
  • Bearish candlesticks with no upper shadows point at a strong downtrend.
  • Candlesticks having a small body and both upper and lower shadows (doji) are signs of a change in trend.

Bullish candlesticks with no lower shadows

The Heiken Ashi indicator may be used for several purposes:

  1. To measure a trend’s strength. If a trend is strong, a trader can hold to it and benefit from trading in its direction.
  2. To identify reversal. A moment of reversal in a trend allows to close the previous trend-following trade or to get in on a new trend.

Heiken Ashi with other indicators

It’s recommended to use the Heiken Ashi together with other indicators, for example, the Stochastic Oscillator. A simple trading strategy involving these two indicators presumes to open a buy trade when the Stochastic exits the oversold area and there’s a reversal candlestick at Heiken Ashi. According to the same logic, a sell trade should be opened when the Stochastic leaves the overbought area and there’s a bearish reversal at Heiken Ashi. You can see the example of the sell signals from the Heiken Ashi and the Stochastic Oscillator on the chart below:

Heiken Ashi together with other indicators

Support and Resistance levels

It’s also possible to define support and resistance levels on the Heiken Ashi chart, as well as price and chart patterns.

Timeframes. If you are an intraday trader, use the Heiken Ashi at timeframes from M5 to H1. If you are a swing trader and hold the position open for several days, you can use Heiken Ashi at H4 and D1.

Currency pairs. You can use the Heiken Ashi for any currency pairs, but the best results can be achieved at the pairs which have the JPY in them (EUR/JPY, GBP/JPY, CAD/JPY) as they tend to be more volatile.

Advantages and disadvantages

The key advantage of the Heiken Ashi is that it filters out the bad signals (market noise) and makes it easier for traders to spot good trade signals. As a result, market analysis becomes easier.

The drawback of the Heiken Ashi indicator is that it lags behind the price. This is natural as the indicator needs the price to form highs, lows and close in order to compute its readings.

In brief: The Heiken Ashi is a powerful analytical tool. It allows traders to focus on the best entry signals as well as ride the trends as long as possible. Use Heiken Ashi together with other technical indicators as well as the price action analysis.

Frequently asked questions

  • How to open an FBS account?

    Click the ‘Open account’ button on our website and proceed to the Personal Area. Before you can start trading, pass a profile verification. Confirm your email and phone number, get your ID verified. This procedure guarantees the safety of your funds and identity. Once you are done with all the checks, go to the preferred trading platform, and start trading. 

  • How to withdraw the money you earned with FBS?

    The procedure is very straightforward.  Go to the Withdrawal page on the website or the Finances section of the FBS Personal Area and access Withdrawal. You can get the earned money via the same payment system that you used for depositing. In case you funded the account via various methods, withdraw your profit via the same methods in the ratio according to the deposited sums.

  • How to start trading?

    If you are 18+ years old, you can join FBS and begin your FX journey. To trade, you need a brokerage account and sufficient knowledge on how assets behave in the financial markets. Start with studying the basics with our free educational materials and creating an FBS account. You may want to test the environment with virtual money with a Demo account. Once you are ready, enter the real market and trade to succeed.

  • How to activate Level Up Bonus?

    Open Level Up Bonus account in web or mobile version of FBS Personal Area and get up to $140 free to your account.

Latest news

NVIDIA beat earnings forecasts!

The giant chip maker exceeded analysts’ expectations. Even with a global GPU shortage!

OPEC may increase oil supply at meeting on March 4

OPEC will hold a meeting on March 4, where it should announce its decision on further oil output.

Risk on is back on market

The risk-on is back on the market as investors focus on the projections for a stronger-than-expected economic rebound and the Fed’s pledge to prolong support for the rest of the year.

Deposit with your local payment systems

Learn more

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Follow us on Facebook

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in 00:30:00

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera