How does one go about trading Heikin Ashi?
Using a Heikin Ashi chart, as described in a prior course, makes identifying trends easier.
Heikin Ashi enables traders to anticipate the introduction of new trends or the reversal of existing trends.
Here are five fundamental strategies to employ Heikin Ashi charts in your trading.
1. Green Candlesticks Signal and Uptrend
When the Heikin Ashi candle turns from red (bearish) to green (bullish), it indicates that the price is about to rise.
If you are currently in a short position, you should consider exiting.
If you’re currently in a long position, you might want to consider adding to it.
2. Green Candlesticks with no Lower Shadow or Wick Indicate a Strong Uptrend.
A significant rise can be shown if there are a number of green shaved bottoms.
Stay as long as the Heikin Ashi candlestick goes from green to red.
Allow your profits to run while riding the rise as long as no lower shadows materialize.
3. Candlesticks with small bodies showing upper and lower shadows indicated a possible trend reversal (or trend pause)
Open a position opposite the current trend because it may be ending.
Remember that if the following candlestick changes color, it does not always signify the conclusion of a trend; it could simply be a pause.
4. Red Candlesticks signal a Downtrend.
When the Heikin Ashi candle turns from green (bullish) to red (bearish), it indicates that the price is about to fall.
If you are currently in a long position, you should consider exiting.
If you are currently in a short position, you should consider adding to it.
5. Red Candlesticks with no upper shadow or wick indicate a strong downtrend.
Have you seen the number of red shaven heads? That’s a significant downward trend.
Stay short until the color of the Heikin Ashi candlestick turns from red to green.
Stay short and ride the downtrend for as long as there are no upper shadows, and let your profits run.
Next Lesson: Heikin Ashi Limitations
