Heikin Ashi

Heikin Ashi: Dan Valcu vs. Sylvain Vervoort
The indicator displays Heikin-Ashi bars which were originally developed by Dan Valcu and presented in the article ‘Using Heikin-Ashi Technique’ in the February 2004 issue of the TASC magazine. A modified version of the Heikin-Ashi bars was later suggested by Sylvain Vervoort in ‘The quest for reliable Crossovers’ which was published in the May 2008 issue of the TASC magazine.

Indicator Description

The Heikin Ashi indicator (sometimes spelled Heiken Ashi) is used for determining market trends, identifying short/long biases. Heikin Ashi candles are created the same way as a normal candlestick charts, but use modified bar formulas. Basically, each candle is calculated and plotted using some data from the previous candle. For additional information on the formula applied, please review our Indicator Spotlight on the Heikin Ashi candles here.

Heikin Ashi Candles Interpretation:

You may use Heikin Ashi candles to determine market trends, identifying short/long biases. Blue candles will show a rising trend, whereas magenta candles indicate a downtrend. Strong up-trends are characterized by long blue bodies with minor lower shadows and conversely for down-trends with long magenta bodies with minor upper shadows. If the bodies decrease in size, one should anticipate a weaker trend. A period of consolidation will generally have several small bodies with both long upper and lower shadows. A very small body with tall shadows may be a warning about a possible change of trend.

Smoothed Heikin Ashi Candles

In general, a Heikin Ashi chart will see a smoother output when compared to a traditional candlestick chart and the bars may then be further smoothed with one of over 30 different moving averages. The indicator furthermore allows for displaying both Dan Valcu’s and Sylvain Vervoort’s versions of the Heikin Ashi bars.

Although Heikin Ashi candles look straightforward and easy to trade, overlaying the primary bars with black for down closes and transparent for up closes will reveal a more nuanced picture. The true price levels will now be visible which is important when setting appropriate stop loss levels. Accordingly, you may also consider displaying Heikin Ashi paintbars to display the trend bias on primary bars containing true price action.

Other Library indicators

The Heikin Ashi candles are best used in combination with  additional tools for technical analysis such as momentum oscillators, support / resistance and volume indicators. Specifically, you may review the Acceleration Deceleration, Laguerre RSI, Know Sure Thing, SRSI and the Projection Oscillator. For support / resistance levels you may have a look our Session Tools and Fibonacci lines, such as Rolling Pivots Monthly weekly Fib retracement levels or the Fibonacci Bands. You may also review our tools for Range and Volume Analyis, i.e. relative range / relative volume analysis.

The indicator is available for NinjaTrader 8 and was discussed in our Heikin Ahsi Spotlight.