Heikin Ashi (or sometime they call it Heiken Ashi) can be translated from Japanese as the “average pace”. The name and the table speak for themselves: Heikin Ashi is sort of an indicator that makes the price chart to look smoother.
If you have ever tried to backtest the standard candlestick patterns then you definitely noticed a great deal of reversal signals that did not lead anywhere. It is a common thing to find several “hammers” or “outside bars” during the downtrend. However, if you keep acting on every single signal like this you will end up with tons of open and very soon closed trades, while the trend is just moving down and making some occasional retracements.
A good strategy requires not to follow every signal but to skip most of those signals with the help of some additional method.
Price | Candlestick | Formula |
Open | Previous candle | (Open + Close)/2 |
High | Current candle | The highest point |
Low | Current candle | The lowest point |
Close | Previous candle | (Open + High + Low + Close)/4 |
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