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Understanding Heikin Ashi charts

Heikin Ashi charts are similar to standard candles only in that they don't use the actual assets' prices but use averages to smooth the price movements. Unlike regular candles, Heikin Ashi charts try to filter out some of the market noise by smoothing strong price swings to more easily identify market trends.

CONTENTS:

What are Heikin Ashi charts

Heikin Ashi charts are a variation of candles. They have the same shape with bodies and wicks, but the color of each candle depends on the current trend. Consecutive green candles indicate that the trend is bullish and a sequence of red candles indicates that the trend is bearish.

Heikin Ashi candles show the average prices, not the actual prices. That's why on the right side of the chart you can see two values — one is the actual price of the asset and the other is the Heikin Ashi price.

To better understand them, let's have a deeper look at how these candles are constructed.

Heikin Ashi construction principles

Heikin Ashi uses a unique formula that affects the candles' shape, size, and their direction:

  • Open = (Previous (Open + Close)) / 2
  • Close = (Current (Close + Open + High + Low)) / 4
  • High = The highest value of a recent high, open, or close
  • Low = The lowest value of the recent low, open or close

! Note: Heikin Ashi candles open at the middle level of the previous candle.

Current candles are calculated with a delay, as their calculation is possible only after the previous candle is closed.

When trading volatile instruments on small timeframes, this chart type can help filter false breakouts of such critical levels like support and resistance, or chart patterns' borders.

Heikin Ashi vs standard candles

Heikin Ashi

  • Provide clearer picture on trends
  • Provide average data and may save your internal resources during market turbulence
  • Less precise for pinpointing exact entry and exit levels

Standard candles

  • More common, better studied, and more information about them is available
  • Work with both chart patterns and candlestick patterns
  • Well-suited for gap trading

How to enable Heikin Ashi

Once you are on Supercharts, open the chart type menu on the upper toolbar, and select "Heikin Ashi."

Heikin Ashi settings

To configure them to suit your unique trading strategy, find the gear button on the upper toolbar, and go to the "Symbol" tab.

If you want to see the actual prices only, click on the "Real prices…"

As you remember, Heikin Ashi already shows it, but maybe you don't need these values to be displayed at all.

Then you can find settings similar to standard candles:

  1. Color bars based on previous close: With this setting on, the color of each bar will be determined by whether its close price is higher (green) or lower (red) than the close price of the previous bar, rather than by the bar's own open and close prices
  2. Body: Change candle bodies' outlook for enhanced visual appearance
  3. Borders: Change the color of the candles' edges
  4. Wick: Choose the preferred color of the candles' shadows

Heikin Ashi in a nutshell

Each chart type serves its unique purpose. With Heikin Ashi, you can easily understand trend and average price, which is often important, for instance, for swing traders and those trying to understand the power of the current trend — the more same-colored consecutive candles you see, the more likely the current trend is coming to an end.

Also read:

Session volume profile charts explained
Understanding Renko charts