HEIKEN ASHI Strategy:
1.INTRODUCTION (WHY HEIKEN ASHI CANDESTICKS)
Often trading on the trend gets difficult due to price action that makes trader exit trades early. (USELESS NOISE FORMED BY TRADITIONAL CANDLES)
This mainly happens due to impact of one single candle or bar on Trader’s ability to hold positions.
Through Heiken Ashi Candles, this problem is largely solved as Price Trend is clearly represented through these.
LOOK at the difference between TRADITIONAL and HEIKEN-ASHI Candlesticks below:
A) TRADITIONAL candlestick with a lot of noise during uptrend and downtrend which confuses most of the traders and forces them to exit early
B) HEIKEN-ASHI with a smooth buttery experience while trading:
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2.TYPES OF CANDLES
Let us now come to the types of Heiken Ashi candles.
In this chart, I have done 5 markings to explain the various types of candles in Heiken Ashi.
a)The wide range yellow/green candles indicates good momentum and shows the stock shall be bullish for some more days unless and until there are signs of reversals
b)The small body green/yellow candles represents the continuation of the trend although they show that the stock is not very bullish but is bullish
c)SPINNING TOP- is formed when the body of the candle is very small (NOT A DOJI) and there is wick equal on both upper and lower side.
d)The wide range red candles shows weakness in the stock
e)INDECISIVE Candles- are formed when it is neither of the above candles (small body and irregular size wicks on up and down side)
Always remember, size of body, shadows, and range of candle determines whether it Is bullish, bearish or neutral candle
Do read futhur to understand
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3) KEY RULES to follow
There are broadly 5 rules that need to be followed when trading with Heiken Ashi Candles.
DO HAVE A LOOK AT THE CANDLES SIMULTANEOUSLY
Rule 1 – Green candles with no lower shadows indicate a strong uptrend: When you spot these on charts, be in the trade and don’t think about profit booking. You might want to add to your long position and exit short positions.
Rule 2 – Candles with a small body with upper and lower shadows indicate trend change: These are indecision candles and require more confirmation.
Rule 3 – Red/Black candles with no upper shadow indicates strong a downtrend: When you spot these on charts, be in the trade and don’t think about profit booking. You might want to add to your short position and exit long positions
Rule 4 – Candles with long lower shadows represent Buying interest. Always take note of these candles and assess price action after you spot these candles.
Rule 5 – Candles with long upper shadows represent selling interest and be cautious with existing long positions if you spot such Candles.
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4) INITIATION AND CONTINUATION:
You just need to know 2 types in trend analysis
1.INITIATION CANDLE
2.CONTUATION CANDLES
1.Initiation candle is one that sets the tone of Trend and defines underlying momentum for price. This is why Initiation candles are most important in Trend Analysis and Price action trading.
2.Continuation candles are ones that reaffirm the direction of trend and are useful to increase positions in the direction of trend.
FREE TIP:
When you begin price trend analysis, always look for initiation Heiken Ashi candles and then look for continuation candles.
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5) IDENTIFYING STRONG TRENDS:
In the chart below, let us see how a strong Up/Down trend looks like.
In Heiken Ashi, we should be measuring strength of move based on Initiation Candles (Candles that represent strong trend).
If you look at the chart, all markings that I have done are that of Strong Initiation candles on the downside and upside (BUY/SELL)
When such candles are visible on the chart, invariably Price tends to move up/low. Always keep range of Candle in mind.
It should be wide with no upper/lower shadows for uptrend and downtrend respectively.
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6) COMMON MISTAKES
Most Common mistake when using Heiken Ashi Candles is to Enter or Exit Trades based on the color of Candle. Most beginners commit this mistake and this should be avoided at all times. Whether it is Heiken Ashi Candles or any other charting method, you need to understand the overall Market Trend and Context. Without this, you will find it difficult to Trade successfully over a longer period of time.(PRICE ACTION IS THE KING) This is just an additional filter like an indicator and should not be treated as the only parameter in your strategy...If trading was so easy then 90% wouldn't have lost their money in trading...Trading is like cooking you need to add the right ingredients in the right amount to taste a dish good.A pinch of salt less can ruin the entire hardword behind making the dish...Similar is trading...Will make a tutorial on risk management as well...Do let me know if you are interested only then it would be wise for me to proceed ahead.
One of the main things you have to do is to analyze which candles contribute to Trend and which do not. This effective way of filtering out relevant candles from non relevant one’s is what will help you succeed with Heiken Ashi Candles.
FREE TIP:(SAVES TIME DO READ)
Always divide your Candles into two types;
1.Candles that have impact on Trend
2.Candles that have no impact
This way, you will know which one’s to be focussed upon.
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7)DISADVANTAGES:
EVERY + HAS A - ELSE EVERY TRADER WOULD HAVE USED THIS STRATEGY TO MAKE TONS OF MONEY EVERYDAY
The one main disadvantage that most traders refer to is that by the time Traders take positions based on Heiken Ashi Candles, the entire move is already over. While there is some merit to this, it is important to note that this mainly applies to short time frame charts. On higher time frame charts (30 Min to Monthly time frame), Heiken Ashi has tremendous benefits and Traders should try and incorporate these in their Trading arsenal.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
I hope this tutorial as helpful for you to understand some basics of HEIKEN-ASHI candlesticks...There are many other types of candlesticks which have their own importance like RENKO and PnF candlesticks...Do let me know in the comments whether I should make posts on STOCKs that I Trade/EDUCATIONAL posts like this
FOLLOW me for many more such content ahead...DO hit the like button...Till then,
HAPPY TRADING :)
1.INTRODUCTION (WHY HEIKEN ASHI CANDESTICKS)
Often trading on the trend gets difficult due to price action that makes trader exit trades early. (USELESS NOISE FORMED BY TRADITIONAL CANDLES)
This mainly happens due to impact of one single candle or bar on Trader’s ability to hold positions.
Through Heiken Ashi Candles, this problem is largely solved as Price Trend is clearly represented through these.
LOOK at the difference between TRADITIONAL and HEIKEN-ASHI Candlesticks below:
A) TRADITIONAL candlestick with a lot of noise during uptrend and downtrend which confuses most of the traders and forces them to exit early
B) HEIKEN-ASHI with a smooth buttery experience while trading:
2.TYPES OF CANDLES
Let us now come to the types of Heiken Ashi candles.
In this chart, I have done 5 markings to explain the various types of candles in Heiken Ashi.
b)The small body green/yellow candles represents the continuation of the trend although they show that the stock is not very bullish but is bullish
c)SPINNING TOP- is formed when the body of the candle is very small (NOT A DOJI) and there is wick equal on both upper and lower side.
d)The wide range red candles shows weakness in the stock
e)INDECISIVE Candles- are formed when it is neither of the above candles (small body and irregular size wicks on up and down side)
Always remember, size of body, shadows, and range of candle determines whether it Is bullish, bearish or neutral candle
Do read futhur to understand
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3) KEY RULES to follow
DO HAVE A LOOK AT THE CANDLES SIMULTANEOUSLY
Rule 1 – Green candles with no lower shadows indicate a strong uptrend: When you spot these on charts, be in the trade and don’t think about profit booking. You might want to add to your long position and exit short positions.
Rule 2 – Candles with a small body with upper and lower shadows indicate trend change: These are indecision candles and require more confirmation.
Rule 3 – Red/Black candles with no upper shadow indicates strong a downtrend: When you spot these on charts, be in the trade and don’t think about profit booking. You might want to add to your short position and exit long positions
Rule 4 – Candles with long lower shadows represent Buying interest. Always take note of these candles and assess price action after you spot these candles.
Rule 5 – Candles with long upper shadows represent selling interest and be cautious with existing long positions if you spot such Candles.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
4) INITIATION AND CONTINUATION:
You just need to know 2 types in trend analysis
1.INITIATION CANDLE
2.CONTUATION CANDLES
1.Initiation candle is one that sets the tone of Trend and defines underlying momentum for price. This is why Initiation candles are most important in Trend Analysis and Price action trading.
2.Continuation candles are ones that reaffirm the direction of trend and are useful to increase positions in the direction of trend.
FREE TIP:
When you begin price trend analysis, always look for initiation Heiken Ashi candles and then look for continuation candles.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
5) IDENTIFYING STRONG TRENDS:
In the chart below, let us see how a strong Up/Down trend looks like.
If you look at the chart, all markings that I have done are that of Strong Initiation candles on the downside and upside (BUY/SELL)
When such candles are visible on the chart, invariably Price tends to move up/low. Always keep range of Candle in mind.
It should be wide with no upper/lower shadows for uptrend and downtrend respectively.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
6) COMMON MISTAKES
Most Common mistake when using Heiken Ashi Candles is to Enter or Exit Trades based on the color of Candle. Most beginners commit this mistake and this should be avoided at all times. Whether it is Heiken Ashi Candles or any other charting method, you need to understand the overall Market Trend and Context. Without this, you will find it difficult to Trade successfully over a longer period of time.(PRICE ACTION IS THE KING) This is just an additional filter like an indicator and should not be treated as the only parameter in your strategy...If trading was so easy then 90% wouldn't have lost their money in trading...Trading is like cooking you need to add the right ingredients in the right amount to taste a dish good.A pinch of salt less can ruin the entire hardword behind making the dish...Similar is trading...Will make a tutorial on risk management as well...Do let me know if you are interested only then it would be wise for me to proceed ahead.
One of the main things you have to do is to analyze which candles contribute to Trend and which do not. This effective way of filtering out relevant candles from non relevant one’s is what will help you succeed with Heiken Ashi Candles.
FREE TIP:(SAVES TIME DO READ)
Always divide your Candles into two types;
1.Candles that have impact on Trend
2.Candles that have no impact
This way, you will know which one’s to be focussed upon.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
7)DISADVANTAGES:
EVERY + HAS A - ELSE EVERY TRADER WOULD HAVE USED THIS STRATEGY TO MAKE TONS OF MONEY EVERYDAY
The one main disadvantage that most traders refer to is that by the time Traders take positions based on Heiken Ashi Candles, the entire move is already over. While there is some merit to this, it is important to note that this mainly applies to short time frame charts. On higher time frame charts (30 Min to Monthly time frame), Heiken Ashi has tremendous benefits and Traders should try and incorporate these in their Trading arsenal.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
I hope this tutorial as helpful for you to understand some basics of HEIKEN-ASHI candlesticks...There are many other types of candlesticks which have their own importance like RENKO and PnF candlesticks...Do let me know in the comments whether I should make posts on STOCKs that I Trade/EDUCATIONAL posts like this
FOLLOW me for many more such content ahead...DO hit the like button...Till then,
HAPPY TRADING :)
Comment:
This is very useful in current scenerio where market is heading higher in a channel and most often people tend to get out of the market due to fear of big correction
