What is Heiken Ashi?

Heiken Ashi is an indicator that draws some candles like Japanese candles, with the objective of giving continuity to bullish and bearish stretches.

It performs a smoothing movement of the candles, which only when there is a trend change will be when the candles change their color.

The formula that will be applied is the following:

Opening= Average previous Heiken Ashi opening and closing

Closing= Average real opening, closing, maximum and minimum

Maximum= max {real maximum, Heken Ashi opening and closing}

Minimum= min {real minimum, Heken Ashi opening and closing}

When applying this formula, we get some fictitious Japanese candles that, when forming with the average of the previous candle generates a continuity, if there is no relevant change in the opposite direction that cause the candle to change the colour. 

Let’s look at this graphic:

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In the upper part, we have the original Japanese candles, and in the lower part, the respective Heiken Ashi candles.

As we can see in the red box, we have a bearish stretch which Heiken Ashi has completely respected, while the Japanese candles, in this stretch, have drawn small stretches in the opposite direction of the bearish stretch.

With this, we can interpret Heiken Ashi as an indicator that helps us to detect stretches to follow a trend.

It can be used as a shot (when there is a change) or as a filter (while the stretch remains in the same colour).

In the element of Heiken Ashi from Tradeasy, you can decide how many Heiken Ashi candles do you want to contemplate for considering a change, from only 1 to as many as you want. (The typical is to consider between 1 and 2 candles).