What are Heikin Ashi Candles

As you already know, Fondex cTrader is a very powerful trading platform! One of the great features it offers is the option to see the price movement using Heikin Ashi candles. You might be wondering what Heikin Ashi candles are, therefore in this article, we will explain what they are and how they are used in trading. The words “Heikin Ashi” are Japanese words and they mean “average bar”. There is a specific formula used to calculate a Heikin Ashi candle and Heikin Ashi charts are used mostly for trend identification.

Heikin Ashi charts are time-based and they look similar to traditional candlesticks, however their Open, High, Low and Close (OHLC) values are calculated using formulas, therefore the outcome is slightly different. Below you can find the formulas used to calculate the Heikin Ashi OHLC values.

Heikin Ash Close = (Open + High + Low + Close)/4. 

Heikin Ashi Open = (Open of the previous bar + Close of the previous bar)/2.

Heikin Ashi High = the maximum value from the High, Open, or Close of the current period.

Heikin Ashi Low = the minimum value from the Low, Open, or Close of the current period.

After the above are calculated, the Heikin Ashi candle is printed on the chart. A Heikin Ashi chart in cTrader looks like the one below

As you can see, candles overlap each other and this is a result of the calculation used to construct these candles.

Viewing Heikin Ashi Charts on Fondex cTrader 

It is pretty straightforward to view Heikin Ashi charts on cTrader. You just need to follow the steps below

1. Navigate to the toolbar and press the three dots

2.  Alternatively, select the arrow on the chart’s tab                     

3. Select a Heikin Ashi timeframe from the dropdown list

As soon as you click on a Heikin Ashi timeframe, your chart will change to a Heikin Ashi chart

How To Read the Heikin Ashi Charts

As mentioned above, Heikin Ashi charts are used to identify trends. Heikin Ashi candles help reading the trend direction, where a trend is building strong and where the trend seems to slow down and stop. Here are some popular patterns you can identify in Heikin Ashi charts that provide useful information regarding the current market state.

Green Candles with No Lower Shadows

When a series of green candles without a lower shadow is formed, then this is a clear indication that we are in a strong uptrend. Maybe it’s time to enter a buy position.

Red Candles with No Upper Shadows

When a series of red candles without an upper shadow is formed, then the market is strongly bearish. Maybe sell too?

Candles with Wicks on Both Sides

When candles with wicks on both sides start to appear, then this is an indication that the previous trend might be coming to an end. Maybe it is a good time to reconsider your market positioning.

Concluding, Heikin Ashi candlesticks have been designed in a way to assist traders reading the trends. Compared to traditional candlesticks, they tend to smooth out the trends, hiding possible fake outs, and allowing traders to stay focused on the actual price movement and its direction. Nevertheless Heikin Ashi charts, as any other technical analysis tool, always needs to be used in context. An out of context interpretation of the Heikin Ashi chart patterns can generate a lot of false signals that could lead to substantial losses. Therefore, when using the Heikin Ashi charts, always consider the market fundamentals that currently move the market and combine the signals with other confirmation signals, like trend indicators, support/resistance levels and the relevant price action taking place on the chart.

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