Heikin Ashi Candles Are Useful For Filtering Out the Noise

Heikin Ashi (HA) candles show average price movement to create a smooth chart. HA candlestick charts often show price trends more clearly than traditional candlestick charts.[1]

Specifically, where traditional candles represent that exact price action that occurred within a time period, Heikin Ashi candles show the average price movement over two consecutive candlesticks and can therefore more smoothly illustrate an uptrend or downtrend (creating a useful and less noisey, but not entirely accurate representation of the price).

Given the above, HA candlestick charts can be incredibly useful for looking at longer term trends in crypto (where charts tends to be rather noisy due to the volatility often present in crypto trading).

For an example of what I mean, below is a Heikin Ashi candlestick charts below that show Bitcoin since 2011 and the NASDAQ since 1985.

See how clearly it shows us the bear vs. bull market cycles within these large timeframes?

If we used regular candles we would see a lot of red candles in the bull trend or green candles in the bear trend, but with HA we see nearly solid and smooth streams of green during the bull and red during the bear.

BOTTOMLINE: When you want to get a sense of a trend, but don’t need fully accurate prices represented, Heikin Ashi (HA) Candlestick charts can be a good choice. These aren’t a replacement for other types of candles, and they won’t give you exact prices due to the way they are calculated, but they do present a useful alternative way to look at price data when trying to spot trends.

TIP: See an exact formula for HA candles at Investopedia.

Bitcoin, bull vs. bear. 2011 – 2018.

Nasdaq bull vs. bear 1985 – 2018.

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Citations

  1. Heikin Ashi Chart Basics. theBalance.com.