If you have used candlestick charts to help you make trading decisions in the past, then Heiken Ashi indicator charts will look familiar. While both strategies use the same kind of chart, however, Heiken Ashi uses different methods of calculation to ensure greater accuracy and clearer numbers. While it may not be faster than normal candlestick charts, Heiken Ashi charting offers an easier way to predict trends, and to understand the state of the market fully and the psychological condition of its investors.
A typical candlestick chart shows four numbers: open, close, high price and low price. The numbers, or candles, are separate and have no correlation or impact on each other. The Heiken Ashi formula, however, relates the candles to each other, taking a little information from the previous candle to formulate the next number. In fact, the term Heiken Ashi is Japanese for “average bar,” and it is called this because it uses averages to determine trends.
Who Uses HEIKEN ASHI?
Heiken Ashi is a type of technical analysis of the price charts, designed to identify trends. Money in any market is gained and lost when prices fluctuate, but by identifying and predicting trends, you can better understand a volatile market and be prepared for its fluctuations. While Heiken Ashi strategy is usually used in equity and commodity markets, it can actually be applied to many markets and is used by those interested in stock trading, forex and futures as well.
Top Three Reasons to Use HEIKEN ASHI
1. It is easier to use and provides clearer information than a candlestick chart. In fact, Heiken Ashi is actually seen as an improved, updated version by the Japanese investors who created both types of analysis. Because the numbers in a candlestick chart do not correspond and reflect each other, it is harder to identify or predict a trend. Because a Heiken Ashi chart is based on averages, candles are better related to each other and trends are more accurately predicted.
2. Heiken Ashi Charting can be used in conjunction with regular candlestick charts. If you are reluctant to forsake a system that has worked for you in the past, there is no reason you have to give up candlestick charts in order to use heiken ashi. In fact, it is recommended that you understand how candlesticks work before incorporating heiken ashi into your trading. Just think of it as another tool to help you greater understand trends.
3. Heiken Ashi can be used with most major trading software. While it is possible to input and analyze Heiken Ashi figures using a spreadsheet program such as Excel, many people find it easiest to use one of the many trading software options available, or an online analysis program. While many popular trading programs do not support Heiken Ashi charts on their own, most offer downloadable updates and plug-ins that will allow you to input this information.
Trending Stocks… The Real Heiken Ashi Charting Advantage
Heiken Ashi Charting can help you to accurately understand trends and predict changes, giving you more control over your trading, by helping you develop an informed investment strategy. By understanding trends, you can better spot opportunities that can result in profit and you can better avoid poor investment decisions.
Click “View Stocks Now” on the image below to start applying Heiken Ashi Charting to Today’s Top 50 Trending Stocks.
Heiken Ashi Charts are calculated using these formulas:
Close price is calculated by averaging the open, close, high and low prices and uses this formula: xClose=(open+high+low+close)/4
Open price is calculated by averaging the open and close prices of the previous candle and uses this formula: xOpen=[xOpen (previous bar) + xClose (previous bar)]/2
High price is simply the high price, open price or close price which has the greatest value. High price uses this formula: xHigh=Max (High, xOpen, xClose)
Low price is deduced by finding the low price, open price or close price which has the lowest value. Low price uses this formula: xLow=Min (Low, xOpen, xClose)
Once a Heiken Ashi chart has been calculated, you can start to analyze the information it provides. In the broadest sense, hollow candles indicate an up trend, while filled candles indicate a downtrend, but there are actually five main indicators to watch. A hollow candle with only an upper shadow signifies a very strong up trend. A hollow candle still signifies an up trend, but it is not quite as strong. A small candle with both upper and lower shadows lets you know that a trend is changing. While filled candles signify a down trend, a filled candle with no upper shadow indicates that the down trend is very strong.