Monday, October 27, 2025
A technical trader's magic weapon: Heiken Ashi bar charts help you capture all trends | Heiken Ashi bar charts
Here is the article.
When using traditional candlestick charts, random factors can cause short-term price fluctuations, potentially interfering with investors' trend analysis. The improved HA candlestick chart reduces the impact of market "noise" by averaging various data points, allowing investors to more accurately identify trends.
The Japanese-inspired "candlestick chart" has long been a staple of technical analysis, allowing investors to clearly and intuitively visualize price fluctuations over a specific period. However, this real-time price chart suffers from a fatal flaw. Looking back at gold price trends from March 2017 to date, it appears that intervals 1, 2, and 3 all fell within longer-term, unilateral trends, yet experienced varying degrees of volatility. These minor fluctuations may have misled some investors into mistaking them for trend reversals, leading them to take actions contrary to the subsequent market trend.
This is because sudden news in the market, speculative behavior, and investors' misinterpretation of technical indicators and market trends will all produce meaningless short-term prices. Therefore, traditional candlestick charts that reflect real-time price changes will produce a lot of "noise", that is, random fluctuations (including price fluctuations and trading volume fluctuations) that fail to clearly reflect the true market trend.
So, is there a graphic that can help investors smooth out meaningless fluctuations and identify true trends? To address this issue, the Japanese modified the original candlestick chart to create a new price chart: the Heikin Ashi candlestick chart (HA candlestick chart), also known as the average candlestick chart, because the opening and closing prices are calculated by averaging the data from two consecutive trading days. This averaging process reduces the influence of random factors and acts as a simple "noise reduction" on price fluctuations. The figure below shows the HA candlestick chart of gold prices over the same period. As you can see, the market trend is more obvious in this chart than in the traditional candlestick chart.
The specific calculation method of the four prices of the HA candlestick chart is as follows:
HA closing price = (original opening price + original closing price + original highest price + original lowest price) / 4
HA opening price = (HA opening price of the previous trading day + HA closing price of the previous trading day) / 2
HA highest price = MAX (original highest price, HA opening price, HA closing price)
HA lowest price = MIN (original lowest price, HA opening price, HA closing price)
However, under normal circumstances, investors do not need to perform complicated calculations. There are ready-made indicators that can be used in major platforms such as FXCM. The operation is as follows: open MT4>Insert>Technical Indicators>Custom>Heikin Ashi, and then make simple settings.
The following article will use detailed price fluctuations to illustrate the advantages of HA candlestick charts over traditional candlestick charts in identifying trends. For the sake of illustration, hypothetical prices are used. It's important to note that theoretically, the HA opening price requires the previous day's HA opening price to calculate the HA opening price. In the absence of readily available data, the opening price of the day the calculation period begins is generally used. However, investors can be assured that the impact of this unadjusted price decreases over time, typically requiring only seven to ten candlesticks.
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As can be seen from the above figure, in the rising market at line 1, a gap appeared on the traditional candlestick chart., but there is no such thing on the HA chart, which avoids the violent fluctuations that may be caused by random factors; and at line 5, the two slightly milder positive lines, after averaging calculation, are reflected on the HA chart as an obviously rising positive line.
Similarly, in the falling market such as Line 2 and Line 3, the HA candlestick chart will remove the "noise" that causes the trend to be blurred and adjust it into a clearer trend signal, making the entire falling trend more obvious. When the market reverses, when the market reverses, that is, the traditional Yin-Yang lines appear alternately, an undecided signal will be formed on the HA candlestick chart, just like the " spinning line " on the traditional candlestick chart."Then the advantages of HA candlestick chart are obvious. Compared with traditional candlestick chart, after eliminating some "noise", it shows more obvious trend continuation and trend reversal.
In addition, HA cannot reflect real-time prices, so some analysis methods of traditional candlestick charts cannot be used, but the general principles remain unchanged. A long Yang line represents a large number of buy transactions in the past two days. If there is no lower shadow,, it means the signal is stronger; a long black candlestick indicates that there is strong selling pressure in the market, and there is no upper shadow line.In addition, from this perspective, the HA candlestick chart also has a greater advantage in showing trends.
As can be seen from the above figure, in the rising market at line 1, a gap appeared on the traditional candlestick chart., but there is no such thing on the HA chart, which avoids the violent fluctuations that may be caused by random factors; and at line 5, the two slightly milder positive lines, after averaging calculation, are reflected on the HA chart as an obviously rising positive line.
Similarly, in the falling market such as Line 2 and Line 3, the HA candlestick chart will remove the "noise" that causes the trend to be blurred and adjust it into a clearer trend signal, making the entire falling trend more obvious. When the market reverses, when the market reverses, that is, the traditional Yin-Yang lines appear alternately, an undecided signal will be formed on the HA candlestick chart, just like the " spinning line " on the traditional candlestick chart."Then the advantages of HA candlestick chart are obvious. Compared with traditional candlestick chart, after eliminating some "noise", it shows more obvious trend continuation and trend reversal.
In addition, HA cannot reflect real-time prices, so some analysis methods of traditional candlestick charts cannot be used, but the general principles remain unchanged. A long Yang line represents a large number of buy transactions in the past two days. If there is no lower shadow,, it means the signal is stronger; a long black candlestick indicates that there is strong selling pressure in the market, and there is no upper shadow line.In addition, from this perspective, the HA candlestick chart also has a greater advantage in showing trends.
As can be seen in the chart above, when the market enters a downtrend, the HA candlestick chart typically displays a series of consecutive black candlesticks. More importantly, when the trend is persistent and strong, the black candlesticks rarely even have upper shadows. Conversely, when the market rises rapidly, the HA chart displays a series of black candlesticks without lower shadows. Investors can draw a very simple conclusion from this: when black candlesticks appear in the opposite direction of the trend, be wary of a reversal.
However, investors should first understand that the HA candlestick chart is a delayed signal, which is both its strength and weakness. Because of its delay, the trading signals it generates are more reliable, eliminating market noise and making it easier to identify trends and seize buy and sell opportunities. However, this delay also makes it difficult to use it to identify market entry points. Raw candlestick charts, on the other hand, reflect price changes more accurately and exhibit virtually no lag. Therefore, readers are advised to combine raw and HA candlestick charts.
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