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Heikin Ashi also termed as Heiken – Ashi means the average bar in Japan. It was developed to filter the market noise made by Japanese candlestick.
The Heikin Ashi Chart is much more easier to analyse than the Japanese Candlestick.
In this article, I will exactly show you on How to read Heikin Chart? and use the same in Olymp Trade.
What is Heiken Ashi Candles?
Heiken Ashi Candles designed by Munehisa Homma in 1700, tells you the average price data to create a Japanese candlestick chart that filters out market noise.
This candlestick is really different from the standard candlestick chart.
In the standard candlestick chart, the candles are independent on the last one However In Heiken Ashi, each candle is dependent. based on Heiken Ashi Formula.
The Heiken Ashi uses a modified formula based on two periods averages. This helps the chart to appear more smooth and clear that helps the traders to identify the trend easily.
The Heiken Ashi Formula is given below:
How to read Heiken Ashi Candles?
Here, To illustrate Heiken Ashi I am going to use Olymp Trade.
If you don’t have an Olymp Trade account. Click Here
You can even sign up from here…try
Firstly, click on register.
Secondly, enter your email, password & hit sign up.
Once you have signed up you will land on the Olymp Trade dashboard.
Click on the chart button and select Heiken Ashi from the menu.
That’s it the basic setup is over!! your dashboard will look something like given below.
Lastly, click on the indicator button.
Select the Stochastic from the given menu.
Heiken Ashi Intraday Strategy
Now, In this section, I will teach you the most proven Heiken Ashi Intraday Strategy.
This Heiken Ashi Strategy can be used in both Intraday Trading and Swing Trading.
However, before I begin there are some rules that need to follow.
Rule: 1. This strategy has worked for me and may or may not work for you. I am not responsible for your loss if any.
2. Don’t break the rule and trust this system
3. Don’t try less time frame chart of 1 min or 5 min
Heiken Ashi golden rule
Okay, now note down this Heiken Ashi Golden Rule:
- If two consecutive green candle appears than it signals a bullish pattern.
- Similarly, If two consecutive Red candle appears than it signals the bearish pattern. that’s it!!!
Let’s see some examples:
- 15 min chart
Given above is a 15 mins chart. and we can clearly see the golden rule has worked.
The moment two consecutive green candle appears than we see a pure bullish pattern and vice versa.
- 1-hour chart
Similarly, in 1-hour chart, The moment two consecutive green candle appears than we see a pure bullish pattern and If two red candle appears than we see a pure bearish trend.
Step: 2 Heiken Ashi Stochastic Strategy
Stochastic is my favourite indicator. It is really simple to use.
The golden rule of Stochastic Strategy says:
- If the Redline is more clear and is above 70 it indicates the overbought level
- Similarly, If the green line is more clear and is below 30 it indicates an Oversold level
How to Trade with Heiken Ashi Strategy?
Trading with Heiken Ashi is very easy. you just need to remember the golden rule of Heiken Ashi and Stochastic.
For better clarity, I have combined the Heiken Ashi and Stochastic golden rule.
- If Two consecutive green candle appears in Heiken Ashi plus If Stochastic Indicator shows oversold signal You can go for BUY Trade.
- Similarly, If Two consecutive Red candle appears in Heiken Ashi plus If Stochastic Indicator shows overbought signal than go for SELL Trade. That’s it!!
Now, let’s check some example:
15 min Chart:
In ( a ) candle we can easily see two consecutive green candles and the Stochastic indicator shows the oversold level, therefore, you can go for buy trade here.
In ( b ) candle two consecutive Red Candle but Stochastic is near to Overbought level so, don’t go for SELL trade here.
In ( c) candle, two consecutive green candles appear, however, Stochastic is not clearly in the oversold zone, so, don’t go for any trade here.
Heiken Ashi Settings | Time Frame | Pattern
By now you must have understood Heiken Ashi and Stochastic Strategy.
Now, Talking about some Heiken Ashi Patterns.
Patterns like Doji and Shooting Stars work exactly the same here. Therefore, I will highly recommend you read the article below.
Talking about Heiken Ashi Settings.
If you are looking for Heiken Ashi Intraday Settings that means if you love to trade more and take more risks you need to set the Heiken Ashi Chart to 15 mins. with Stochastic length to 14.
- In 15 mins chart, you can trade more as you will see more & more overbought & oversold signals.
- 15 min chart helps you generate more profits than a longer time frame as you can trade more here
- 15 mins chart is a bit risky as you might get some false signals
If you are a Trader who wants more profit and is okay with moderate risk 15 min chart is best for you.
Heiken Ashi 1 Hour Strategy | 30 min Strategy
Next, Talking about 30 min & 1-hour chart this chart is most suitable for swing traders.
- Minimum Risk
- Good Signals
- Idol for conservative Traders
- Low Profit
- Less Trade
Overall: If you are a trader who doesn’t like to take too much risk and okay with low profit and less trade 30 min & 1-hour chart is surely for you.
Homework: Check Your Knowledge
Answer the following:
( a ) Which trade you should take?
( b ) Which trade you should take?
( c ) Which trade you should take?
Comment your answer below without seeing others answer. I will reply if it right or wrong.
So, this is the end of this article I hope you have found this article helpful.
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FAQ: Given below is the FAQ asked by students.
Is Heiken Ashi Reliable?
Ans: According to me, Heiken Ashi is the most reliable chart. you always use it in long term to gain huge profit.
How do you use Heiken Ashi?
I personally use Heiken Ashi with Stochastic. you can also use RSI for better results.
However, always use Support and resistance to confirm your order.