Japanese CandleStick Heikin Ashi candlestick |
What distinguishes Heikin Ashi from a standard candlestick?
Let's compare and contrast a Heikin Ashi candlestick chart with a standard Japanese candlestick chart.
Read Also: What is Heikin Ashi And How To Trade It?
Let's look at some genuine charts because a picture is worth a thousand pips.
First, here's a daily (1D) chart of the GBP/JPY in traditional Japanese style:
The same GBP/JPY rate is shown on a Heikin Ashi candlestick chart:
Let’s put them both side-by-side:
The classic Japanese candlestick chart is on the LEFT, while the Heikin Ashi chart is on the RIGHT.
Read Also: What is Heikin Ashi And How To Trade It?
The right chart shows how directional moves are smoothed out in a way that the left chart does not.
Traditional Japanese candlestick charts' candles regularly change color from green to red (up or down), making them difficult to read.
Candles on the Heikin Ashi chart, on the other hand, display more consecutive colored candles, making it easier for traders to spot historical price moves.
You'll notice that the candles on Heikin Ashi charts prefer to stay green during uptrends and red during downtrends.
Read Also: What is Heikin Ashi And How To Trade It?
Traditional Japanese candlesticks, on the other hand, alternate color even if the price is firmly moving in one way.
The color of the candlesticks can change almost as frequently as Kylie Jenner's hair color.
You probably didn’t even notice the image above is a candlestick chart. 😂
Read Also: What is Heikin Ashi And How To Trade It?
Anyways, back to the side-by-side chart…
In terms of price action, you can clearly observe that the Heikin Ashi chart is significantly smoother.
This is why some forex traders choose to use Heikin Ashi candles since they reduce chart noise and allow them to more clearly assess trends.
The way the price is displayed in terms of the open and close distinguishes Heikin Ashi from a standard Japanese candlestick chart.
Read Also: What is Heikin Ashi And How To Trade It?
If you look closely at the Heikin Ashi chart, you'll note that each Heikin Ashi candlestick begins at the MIDDLE of the candlestick before it, rather than at the level where the preceding candlestick ended.
Heikin Ashi candlesticks “act” this way due to the way they are calculated.
Read Also: What is Heikin Ashi And How To Trade It?
In the next lesson, you’ll learn how to calculate Heikin Ashi so you can sound super smart at dinner parties.
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