What is Heiken Ashi?

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

It performs a smoothing of the movements of the candles, that produces that only when there is an evidence of trend change, it will be when the candles change their colours

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, it generates a continuity, while there is no change relevant enough that allows to paint the candle in the opposite direction.

Let’s look at this graphic:

     

    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)

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

     

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