How To Read Heikin Ashi Candlesticks For Smoother Trends

Heikin Ashi candlesticks help me filter market “noise” and see the trend far more clearly than traditional Japanese candles. In my trading experience, learning how to read heikin ashi candlesticks correctly is the key to riding a trend longer and avoiding false signals. This A-Z guide explains exactly how to interpret their signals.

1. What Are Heikin Ashi Candlesticks?

Heikin Ashi (which means “average bar” in Japanese) is a special charting technique that smooths price movement data to filter out market noise.

Unlike traditional Japanese candlesticks that show the exact open, high, low, and close (OHLC) prices, Heikin Ashi candles use a modified averaging formula to calculate their open and close values (Corporate Finance Institute, n.d.). The result is a much cleaner, “smoother” looking price chart that makes it easier to identify the true market trend.

Heikin Ashi charts are most effective for trend-following, swing trading, and position trading. They help traders stay in a winning trade longer by filtering out the minor, scary pullbacks.

While some day trading professionals use them, they are generally not ideal for very fast scalping because the averaged signals are slightly delayed.

Heikin Ashi vs. Japanese Candlesticks

The main difference is clarity vs. speed.

• Japanese Candlesticks (Traditional): These show the exact price for the period. They are accurate for price but can be very “noisy”. A strong uptrend might still have several red candles that can confuse or “shake out” a trader.
• Heikin Ashi Candlesticks: These show an averaged price. They are much “smoother” and better at showing the trend’s direction (e.g., a long series of green candles). However, because they are an average, their signals are slightly delayed (lagging).

2. How Are Heikin Ashi Candles Calculated?

Heikin Ashi candles look “smoother” because they don’t use the standard Open, High, Low, and Close (OHLC) values. Instead, they use a modified formula that averages the price data from both the current and previous candle. This averaging is the “secret” to how Heikin Ashi filters out price movement noise.

Here are the four formulas used to create a single Heikin Ashi candle. (Note: “HA” means Heikin Ashi, and “Previous” refers to the prior HA candle).

This is simply the average price of the current, standard candle.

This is the midpoint of the previous Heikin Ashi candle’s body.

The HA-Open formula is the most important one for smoothing the price chart.

Unlike a traditional chart where the Open price can gap up or down, the Heikin Ashi Open is forced to start at the midpoint of the previous candle. This link to the past candle is what removes gaps and averages out minor, insignificant price movement, resulting in a cleaner chart that shows the true underlying trend.

3. How to Read Heikin Ashi Candlesticks

Reading Heikin Ashi is very different from reading traditional candles. You are not looking for complex patterns; you are looking at the candle’s body and its wicks (or shadows) to measure the trend’s strength.

3.1. Identifying Strong Bullish Trends

You can identify a strong bullish (upward) trend by a series of long, green candles with a full body that have no lower wicks (or shadows).

The absence of a lower wick means that buying pressure was so strong that the price never dipped below the opening price. Traders read this price movement as a signal to hold a long (buy) position, as the bullish momentum is still very high.

3.2. Spotting a Weakening Bullish Trend

You can see a bullish trend start to show weakness when the green candles get smaller and, most importantly, when they start to show lower wicks.

The appearance of a lower wick means that sellers were able to push the price down temporarily. This price movement tells a trader that the trend might be pausing or preparing for a pullback.

3.3. Identifying Strong Bearish Trends

Identifying a strong bearish (downward) trend is the mirror image of a strong bullish trend. You can spot it by a series of long, red candles that have no upper wicks (or shadows).

The absence of an upper wick means selling pressure was so dominant that the price movement never pushed above the opening price. This is a strong signal to hold a short (sell) position.

3.4. Spotting a Weakening Bearish Trend

Weakness in a bearish trend appears when the red candle bodies get smaller and, critically, when they start to show upper wicks.

An upper wick signals that buyers are starting to step in and “fight” the sellers. This price movement means the selling pressure is easing, and the trend might be slowing down.

3.5. Spotting Potential Reversals (Indecision)

Trend changes or new sideways periods are often signaled by candles with very small bodies and long wicks on both sides (upper and lower).

These small candles (often looking like a Heikin Ashi “Doji”) show total indecision. This is one of the clearest reversal signals and a warning that the previous trend is likely over, and the market may be reversing or moving sideways.

4. What Are the Key Heikin Ashi Chart Patterns?

Beyond just single candles, you can read the “story” of the market by looking at a few simple Heikin Ashi chart patterns. Competitors often miss this, but these patterns clearly show you the market’s phase.

4.1. The Trend Acceleration Pattern

Trend acceleration becomes visible as a series of long-bodied candles (green or red) that have no wicks against the trend. For example, in a strong uptrend, you will see multiple long green candles with no lower wicks. This pattern signals that price movement momentum is increasing and the trend is very healthy.

4.2. The Trend Exhaustion Pattern

Trend exhaustion is identified when the candle bodies start to get smaller and smaller after a long move. Even if the candles are still green, their shrinking size shows that buying pressure is drying up. This pattern is a warning to look for a potential pullback or reversal.

4.3. The Heikin Ashi Doji Reversal

The Heikin Ashi Doji is the most important reversal signal. A Doji is a candle with a very small (or non-existent) body and long wicks on both sides. When a Doji appears after a strong, long trend, it signals that the trend has stopped and a reversal is highly likely.

4.4. The Consolidation Zone Pattern

A consolidation zone (a sideways market) appears as a mix of small-bodied red and green candles that all have wicks on both sides. This “choppy” price movement shows that neither buyers nor sellers are in control, and the market is in a period of indecision.

5. How Do You Trade Using Heikin Ashi?

The main advantage of Heikin Ashi is its simplicity. The trading strategies are visual and based on the clear trend patterns you can see on the chart.

5.1. The Trend-Following Strategy

Trend-following is the most popular and straightforward Heikin Ashi trading strategy.

• Entry: Wait for a strong trend to establish itself (e.g., a series of long green candles with no lower wicks). You can enter a “Buy” trade on the next green candle.
• Exit: You hold the trade as long as the green candles continue. The exit signal is the first sign of weakness, such as the first red candle appearing or a candle with a long lower wick.

5.2. The Pullback Strategy

Using a pullback trading strategy is a more patient approach. Instead of chasing a strong move, you wait for a short pause.

• Setup: In a strong uptrend (long green candles), you wait for the trend to pause. This “pause” will appear as a few small-bodied candles (green or red) that have wicks on both sides.
• Entry: As soon as a new, strong green candle appears after the pause, you enter a “Buy” trade, betting that the main trend is resuming.

5.3. The Breakout Confirmation Strategy

Traditional candles can give many “false breakouts.” You can use Heikin Ashi to confirm a real breakout.

• Setup: Identify a clear consolidation range or a major support/resistance level on your chart.
• Confirmation: Wait for the price to break the level.
• Entry: Do not enter immediately. Wait for the first Heikin Ashi candle after the breakout to close. If it is a long-bodied candle with no opposing wick, it confirms the breakout has strong momentum, and you can enter the trade.

6. How to Combine Heikin Ashi With Other Indicators (Confluence)

Heikin Ashi charts are powerful for seeing the trend, but they have one major weakness: they are slow (lagging). As lagging trend indicators, they can give you a late signal.

To fix this, you should never use Heikin Ashi alone. A professional trader always confirms the candlestick’s signal with other, faster indicators as part of their technical analysis. This is called “confluence in trading.”

• Moving Averages (20 EMA / 50 EMA): Use trend indicators like a Moving Average to confirm the main trend. The rule is simple: only take “Buy” signals (strong green candles) when the price is above the 50-period EMA, and only “Sell” signals (strong red candles) when the price is below it.
• RSI or Stochastic: Use these indicators to spot “overbought” (over 70) or “oversold” (under 30) conditions. For example, if you see a strong green Heikin Ashi trend, but the RSI is over 70, it’s a warning not to enter a new “Buy” trade.
• ATR (Average True Range): Heikin Ashi candles do not show the real price, so you cannot use them to set your stop-loss. You must use the ATR indicator to measure real volatility. A common rule is to place your stop-loss at a distance of 1.5x or 2x the ATR value from your entry.
• Volume: Use volume to confirm breakouts. A breakout on a Heikin Ashi chart is only reliable if it happens with a huge spike in volume. Low volume often signals a “fakeout.”

7. What Are the Pros & Cons of Heikin Ashi Candles?

Heikin Ashi charts are excellent for identifying trends, but they are not perfect. It’s critical to understand their specific advantages and the disadvantages (or “trade-offs”) that come with them.

7.1. Advantages (The Pros)

The main advantages of using Heikin Ashi charts come from their ability to smooth price action and reduce stress.

• Clear trend visualization: The averaging formula smooths out the chart, making it much easier to see the true direction of the trend (e.g., a long block of green candles).
• Noise reduction: Heikin Ashi charts filter out minor, insignificant price movement and “market noise.” This helps prevent traders from panic-selling in a good uptrend just because of one small, traditional red candle.
• Good for trend-following: Because they are “smoother” and reduce noise, these candles are excellent for swing trading, position trading, and trend-following strategies. They help you stay in a winning trade longer with less stress.

7.2. Disadvantages (The Cons)

The main disadvantages are all related to the averaging formula, which causes a delay.

• The price is not “real”: The “Close” price you see on the Heikin Ashi candle is an average. It is not the actual, “live” closing price of the asset. You must use a traditional chart or your broker’s price feed for the real price.
• Not good for high-speed scalping: The averaging formula makes the signals slightly delayed. This is not suitable for very fast scalping strategies that rely on split-second entries.
• Lagging (delayed) signals: The “smoothing” comes at a cost: lag. A reversal signal (like a Heikin Ashi Doji or a color change) will often appear on your chart after the actual price has already turned.

8. What Do Example Trades Using Heikin Ashi Look Like?

The easiest way to understand how to read heikin ashi candlesticks is to see them in a real trade. Here are two classic case studies.

8.1. Case Study 1: Buying in a Strong Bullish Trend

This example shows a classic trend-following “Buy” setup.

1. Identify Trend: The price is trading above the 50-EMA, confirming a clear uptrend.
2. Find Signal: The chart prints a series of long, green HA candles with no lower wicks, signaling strong bullish momentum.
3. Entry: Enter a “Buy” trade at the open of the next green candle.
4. Stop-Loss (SL): Important: Place the stop-loss based on the real price from a traditional chart (e.g., just below the actual recent swing low).
5. Take-Profit (TP): Hold the trade until the first red HA candle appears, signaling that the bullish momentum has paused or reversed.

8.2. Case Study 2: Selling in a Strong Bearish Trend

This example shows a “Sell” setup in a strong downtrend.

1. Identify Trend: The price is trading below the 50-EMA, confirming a clear downtrend.
2. Find Signal: The chart prints a series of long, red HA candles with no upper wicks, signaling strong bearish momentum.
3. Entry: Enter a “Sell” (short) trade at the open of the next red candle.
4. Stop-Loss (SL): Place the stop-loss based on the real price from a traditional chart (e.g., just above the actual recent swing high).
5. Take-Profit (TP): Hold the trade until the first green HA candle appears, signaling that the bearish momentum is over.

9. What Tools & Platforms Can You Use for Heikin Ashi?

Heikin Ashi is not a custom indicator; it is a chart type. Almost every modern trading platform allows you to change your chart from “Candlesticks” to “Heikin Ashi” with a single click.

• TradingView: This is the most popular platform for technical analysis and charting. You can easily switch to Heikin Ashi by clicking the candlestick icon in the top toolbar and selecting “Heikin Ashi” from the drop-down menu.
• MetaTrader (MT4/MT5): Heikin Ashi is a default, built-in indicator on MT4 and MT5. You can find it in the “Indicators” -> “Custom” section of the Navigator window and drag it onto your chart (often for CFDs trading).
• NinjaTrader / Thinkorswim: These advanced platforms, popular for futures and stocks, also offer Heikin Ashi as a default chart type. You can select it from the main chart settings or properties menu.
• Mobile Apps: Nearly all major trading apps, including the official TradingView and MT4/MT5 mobile apps, allow you to switch to a Heikin Ashi chart type.

10. Frequently asked questions about Reading Heikin Ashi Candlesticks

11. Conclusion

Learning how to read Heikin Ashi candlesticks is a skill that helps you see the trend clearly and reduce the number of mistakes caused by market “noise.”

This tool is most powerful when you combine it with other indicators like a Moving Average (MA), the RSI, or Volume for confirmation. This applies to all derivatives, stocks, or crypto.

Before you trade with real money, you should test these strategies on a demo account to find a style that fits you. To learn more expert trading strategies, explore the free guides at Piprider.com.