Heiken Ashi Trading System

Heiken Ashi (or Heikin Ashi, Heikin-Ashi) is the method of representing the charts using the Japanese technique of the balanced bars. Compared to the traditional Japanese candlestick charts the Heiken Ashi charts are more easily read, provide clearer picture of the market and allow easy trend spotting. What is good about this method is that it i’s included into the standard set of the MetaTrader 4 indicators. You can find it there under the Custom submenu. I will not explain how to calculate those candlesticks here because MT4 does it all automatically for you and you do no’t have to worry about how those candles are drawn. Here I will tell you how to use Heiken Ashi in trading the trends. You can see the example Heiken Ashi chart:

Heiken Ashi Chart Example

As you see, white bodies are the uptrend candles and the red bodies are the downtrend candles. The upper shadows are usually absent on the downtrends and the lower shadows are absent when the trend is going up. There are 5 Heiken Ashi scenarios for trends:

  1. Trend is normal. Rising white bodies signal ascending trend and falling red bodies signal descending trend.
  2. Trend is getting stronger. Rising longer white bodies with no lower shadows for ascending trend; falling longer red bodies with no upper shadows for descending trend.
  3. Trend is getting weaker. Candle bodies become shorter and for ascending trends lower shadows occur, for descending trends — upper shadows.
  4. Trend consolidation. Small candle bodies with both upper and lower shadows.
  5. Trend is changing (not accurate signal). Very small candle body with long upper and lower shadows.

That’s all you have to know to trade on the trends successfully if you are using Heiken Ashi charting method. But I also recommend reading some other article on Heiken Ashi if you want to learn more about using it.

7 thoughts on “Heiken Ashi Trading System

  1. Quillan

    I think you have your shadow comments in 3. the wrong way round.
    Shadows appear above when trend is ending, as it is evidence that the upward thrust has run out, with lower closes from the candle high, and vice versa at a bottom.Exactly the same rule which applies to the standard Japanese candlesticks.I am surprised no one has picked this up, or does it suggest no one else is reading your comments?

  2. enivid

    Quillan, of course, both of your suggestions may be right :). But as far as I know, in Heiken Ashi candles it’s as written in my 3rd list item – the shadow occurs below the body for ending uptrend and above the body for the downtrends. Such shadow signals a “try” of the market to move in the opposite direction. Such candle may look like what you’ve described (an upper shadow for uptrend and lower shadow for downtrend) in normal Japanese candlestick view but in Heiken Ashi it will look different.

  3. Quillan

    I’m sorry enivid, your response does not hold water. Any Heiken Ashi Chart will bear out what I say , and not what you suggest in your reply.

  4. Spacefaring

    enivid appears to be correct IMO. If you look at a Heiken Ashi chart, it behaves as enivid describes and not as Quillan asserts. Heiken Ashi is very different from traditional Japanese candlestick charts.


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