1/ WHAT IS HEIKIN ASHI (HA) CANDLE?
Heiken Ashi candlestick (abbreviated as HA), when translated into Japanese means Average Bar. Because this candlestick is composed of average values, it is called an average price bar. The formation of HA candlesticks is calculated based on current and past market price data, from which the HA chart is represented smoothly, smoothly like the moving average - MA (Moving Average).
2/ HA CANDLE STRUCTURE
To create an HA candle, the parameters are calculated as follows:
(1) HA candle opening price = Average opening and closing price of previous HA candle = (Previous HA opening price + Previous HA closing price) / 2.
(2) HA candle closing price = Average of current candle's closing, opening, highest and lowest prices = (Opening price + Closing price + Highest price + Lowest price) / 4.
(3) HA candle top = choose the highest level among 3 levels including Highest price, HA opening price or closing price.
(4) HA candle bottom = choose the lowest level out of 3 levels which are Lowest price, HA Open price or Closing price.
3/ CHARACTERISTICS
Heiken Ashi candles are calculated based on past and present data. Therefore, candlestick patterns will directly affect each other, causing a certain level of delay. This is also the most characteristic feature of the Heiken Ashi candlestick pattern.
Provides safer and more accurate entry and exit signals due to information smoothing capabilities.
Clearly shows market trends
And finally, the chart is intuitive, simple, easy to read, without too many patterns, suitable for new investors.
4/ ADVANTAGES
The chart is smoother than Japanese candlesticks, thereby helping investors see trends more accurately.
Seamless Green - Red candlestick chart makes the chart easier to see than Japanese candlestick chart
Looking at the HA chart helps investors eliminate the psychology of fluctuating when prices fluctuate.
Suitable for short-term time frames 15p, 30p, 1H, 4H, 1D, W
5/ DISADVANTAGES
The Heiken Ashi candlestick pattern does not represent a specific price for the current moment on the chart.
Since HA candles are calculated based on the performance of the candle before it, HA candlestick patterns often signal reversals later. Therefore, strategies that investors rely on 1 or 5 minute charts are not suitable and not really effective.
Not suitable for active profit taking - loss cutting
6/ Identify market trends thanks to Heiken Ashi
The price trend is up, shown by consecutive green candles. Candlesticks with long bodies, long upper shadows and short or absent lower shadows indicate a prolonged uptrend. This is the time when investors can place BUY orders.
Red candles are a signal of a downtrend. Red candles with long bodies, long lower shadows, short or no upper shadows indicate a downtrend and may last. Investors can place a SELL order.
7/ Identify reversal signals using Heiken Ashi candles
Heiken Ashi Doji candles usually have short bodies, with upper and lower shadows. When this candle appears, it is a sign that the market is pausing the current trend and is likely to reverse.
Since market noise has been eliminated, this signal is quite reliable. Investors can enter orders as follows:
If a green Heiken Ashi Doji candle appears, the market is likely to reverse from up to down. At this time, investors should consider selling.
If a red Heiken Ashi Doji candle appears, it shows that the market is reversing from down to up. At this time, investors should buy.
Note: Heiken Ashi Doji candles can appear very often and are not always a reversal signal. To determine accurately and avoid risks, investors should combine other indicators.
