Those who have already started their journey in the CFD trading industry, we assume, have already covered the basics of the different chart systems like candlesticks, bars, and line charts. These are very common topics and most probably the most popular technical analysis methods deployed by Forex traders.
Apart from these analyses, there is another chart that serious traders should learn about. That is the Heikin Ashi graph. Let’s learn more about this Heiken Ashi graph.
Introduction to Heikin Ashi (HA) Trading Charts
Heikin Ashi, as it sounds, unique and differs from other types of the methodical analysis system. It exploits a completely different approach and technique to present price action. However, the display of HA may seem like a traditional candlestick chart at first glance.
But there is a significant difference in the nature of both. The methods used to analyze and evaluate the market condition are where they differ.
Japanese traditional candlesticks are effective when it comes to finding an ideal entry point as they show possible reversals and breakouts. To get an overall picture of the market, a trader needs to learn details of the Japanese candlestick patterns.
When it comes to HA charts, learning about their functions is relatively easy. That’s where HA charts enter the picture to guide the trader who is already in the middle of a trade. They guide a trader, advising them whether to execute a trade or to get out of the market. These charts act as great complementary instruments to candlesticks. The former makes the latter more readable and beneficial to users.
This is more like a lighthouse that tells a sailor ( or a trader) that land is near, but he can call it a day by landing here, or he can go further ahead if he thinks he had enough ration and water and can impose more risk to his life. Of course, the authority is in the sailor’s hand to make the call, as he will be accountable solely for whatever decision he makes eventually.
Actually, at its core, Heikin Aishi is just a modified and edited candlestick charting system that has rediscovered and reshaped the way of displaying the course of the price. By using them, trend traders can feel a bit more confident while deciding whether to give up or to persist in their courses. But always use a professional CFD trading platform while analyzing the Heiken Ashi charts. It will help you to get the exact data.
Some other traders, especially the longer-term ones, deploy Heikin Ashi as just an alternative to candlesticks. The rest of the traders use them in conjunction with the candlestick charts. All they do is switching to one from another depending on their needs.
What is Heikin Ashi
Though we have already told many basic features and core concepts of the Heikin Ashi charts, let’s get a more formal definition of these chart types.
In the Japanese language, Heikin means average and Ashi means to move or pace. So, these two words Heikin Ashi indicate the price’s average pace or velocity. The HA is a special kind of charting technique that resembles candlesticks, and was invented to sweep away the market noise.
The technique that this charting system uses was created several hundreds of years ago by a Japanese rice merchant from Sakata. The same person invented the candlestick charting technique.
Homma understood that just by tracking the price course in the rice market, he could literally observe the psychological feature of all the market participants and also can make use of the common patterns.
He understood that psychological patterns are something that people have achieved over a long period of perceivably best practices. These patterns have now converged with the human tradition regardless of all the characteristics differences of people.
So, came up with two best ways to draw those patterns on the paper which are still being used by the traders. Learn about this HA chart along with the Japanese candlestick patterns. Improve your skills and you will see a big improvement in your performance.