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(G) Heikin Ashi Cheat Sheet

The document discusses Heikin Ashi, a type of price chart consisting of modified Japanese candlesticks that filters out market noise and provides a clearer visual representation of trends. It presents the formulas for calculating Heikin Ashi candlesticks, which differ from traditional candlesticks by incorporating the prior period's open and close. Interpretations of candlestick patterns on Heikin Ashi charts are also provided, alongside advantages like reduced false signals and disadvantages like potential late identification of trend reversals.

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2K views

(G) Heikin Ashi Cheat Sheet

The document discusses Heikin Ashi, a type of price chart consisting of modified Japanese candlesticks that filters out market noise and provides a clearer visual representation of trends. It presents the formulas for calculating Heikin Ashi candlesticks, which differ from traditional candlesticks by incorporating the prior period's open and close. Interpretations of candlestick patterns on Heikin Ashi charts are also provided, alongside advantages like reduced false signals and disadvantages like potential late identification of trend reversals.

Uploaded by

The Shit
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Heikin Ashi Cheat Sheet

Heikin Ashi is a type of price chart that consists of candlesticks.

Modified Japanese candlesticks.

A Heikin Ashi chart filters market noise and provides a clearer visual representation
of the trend.

For beginner traders, this means that the trend is easier to see.

For experienced traders, the Heikin Ashi charts help keep them in trending trades,
while still being able to see classical chart pattern setups.

Heikin Ashi candlesticks look similar to traditional Japanese candlesticks but they are
different so don’t confuse the two.

Heikin Ashi is different from traditional Japanese candlestick charts, in that it takes the
prior session open and close into account for the open, which removes any gaps
between candlesticks (or bars) on the chart.

1
How to Calculate a Heikin Ashi Candlestick

Price Candlestick Formula

Open Previous candle (Open + Close)/2

High Current candle The highest point

2
Low Current candle The lowest point

Close Current candle (Open + High + Low + Close)/4

3
How to Interpret Heikin Ashi Candlesticks

Chart Observation Interpretation

Green candlesticks with long bodies Uptrend

Red candlesticks with long bodies Downtrend

4
Small body surrounded by upper and lower shadows Trend Pause or Trend Change

Green candlesticks with no lower shadows Strong Uptrend

Red candlesticks with no upper shadows Strong Downtrend

5
Advantages of Heikin Ashi
The opportunity to flex? Telling your friends that you use “Heikin Ashi” charts sounds
pretty cool. 😏

When compared to the traditional Japanese candlestick chart, Heikin Ashi slows down
the speed of the market, eliminating unnecessary false signals.
False signals and retracements are minimized giving you greater confidence in your
price action analysis.

The visual representation of a “strong trend” allows you to stay in the trade without
having to question yourself or make any knee-jerk reactions.

Disadvantages of Heikin Ashi


Heikin Ashi has some weaknesses.

Any indicator that is based on slowing down the signals is pretty much only
useful when the price is trending.

In a sideways or choppy market, Heikin Ashi will kick yo ashi. 😂

6
Since Heikin Ashin smooths the price, it can be prone to being late in identifying trend
reversals, which means if you’re in a trade, you’ll end up with a late signal to close it
and end giving up some unrealized profits.

Heikin Ashi isn’t ideal for very short-term trading and scalping.

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