When it comes to trading, understanding and identifying trends is crucial — yet traditional candlestick charts often create confusion with their volatility and noise. Enter Heikin Ashi: an ancient but powerful charting technique that helps traders “smooth out” price action and stay focused on the real trend.
In a recent masterclass, seasoned trader and educator Stuart delivered a practical, easy-to-follow breakdown of Heikin Ashi charts, how they work, and — most importantly — how to use them strategically to improve trading results.
Here’s everything you need to know.
What Are Heikin Ashi Candles?
Heikin Ashi, roughly translating to “average bar” in Japanese, was developed in the 1700s by Munehisa Homma, the legendary rice trader who also contributed to the development of traditional candlestick charts. Homma’s goal was simple: create a way to filter out market “noise” and focus on the core trend.
Instead of plotting price action based directly on the standard open, high, low, and close (OHLC) of each session, Heikin Ashi candles use averages to construct a smoother, less erratic view of price movements.
Each Heikin Ashi candle is built using:
- Close = (Open + High + Low + Close) ÷ 4
- Open = (Open of the previous candle + Close of the previous candle) ÷ 2
- High = Maximum of the High, Open, or Close
- Low = Minimum of the Low, Open, or Close
Because of this calculation method, Heikin Ashi candles tend to show more consistent color patterns and smoother trends, making it much easier to spot when a market is trending — and when it might be changing direction.
Why Use Heikin Ashi?
Heikin Ashi candles are particularly helpful because:
- They filter out minor fluctuations, reducing “market noise.”
- They clearly display the strength of a trend (via candle size and wicks).
- They can help traders stay in trends longer instead of exiting too early.
- They work across any timeframe — from 1-minute scalping to daily swing trading.
However, it’s important to recognize that Heikin Ashi charts also have limitations:
- They lag more than traditional candles because they’re based on averages.
- Price gaps are hidden, which can be a drawback for gap-trading strategies.
- Actual entry and exit points may feel “off” compared to standard candlesticks.
This is why many experienced traders, like Stuart, recommend using both: Heikin Ashi for trend direction, and standard candles for pinpointing entries and exits.
The Heikin Ashi Strategy Presented
Stuart emphasizes a straightforward but highly effective way of using Heikin Ashi charts:
✅ Stay with the trend — Follow the candle color:
- Green (or white) candles = bullish trend → look for long opportunities.
- Red (or black) candles = bearish trend → look for short opportunities.
✅ Focus on candles without wicks:
- A strong uptrend is indicated by candles without lower wicks.
- A strong downtrend is indicated by candles without upper wicks.
- If you spot candles with wicks on both sides, it signals indecision — a potential reversal or a pause.
✅ Scaling In and Scaling Out:
- Add to your position when large candles appear without wicks in the direction of your trade.
- Reduce or close positions when candles start showing smaller bodies or develop wicks, suggesting weakening momentum.
✅ Use timeframes wisely:
- Heikin Ashi shines brightest on higher timeframes (1-hour, 4-hour, daily).
- It’s still usable for scalping on lower timeframes, but with more caution.
✅ Combine with basic money management:
- Always use stop-losses.
- Adjust position size according to risk tolerance.
- Let winners run by trailing stops under Heikin Ashi candles for long trades (or above them for shorts).
When Heikin Ashi Might Struggle
Heikin Ashi is not a silver bullet. It performs best in trending markets. In sideways, range-bound conditions, Heikin Ashi can still give false signals or cause frustration because trends may appear stronger than they are.
Therefore, it’s crucial to:
- Monitor candle size and wick development closely.
- Combine Heikin Ashi with basic trendlines, support/resistance zones, or other momentum indicators like RSI or MACD.
Final Thoughts
If you want a cleaner, calmer view of the market and a more confident way to follow trends, Heikin Ashi can be a game-changer. It encourages discipline — staying with trades longer when conditions are strong — and helps avoid emotional reactions to minor price movements.
As Stuart summed up:
“With Heikin Ashi, it’s simple: strong body, no wick — stay in. Small body, wicks appearing — think about getting out.”
In a noisy market, sometimes simplicity is the ultimate edge. Give Heikin Ashi a try on your next trading session — and may the trends be ever in your favor