Analysing Cryptocurrency Trends: Heikin Ashi Explained

Reducing unnecessary noise from our charts can assist us in making better trading decisions. There are several methods to achieve this, with one of the most effective ones being Heikin Ashi. Let’s delve into everything you need to know about it. Are you ready?

1. Heikin Ashi: What You Should Know

Heikin Ashi is a special type of chart used in crypto trading. A Heikin Ashi chart appears as a modified version of a normal chart. The goal of Heikin Ashi charts is to make it easier to see the main trend of a price movement by reducing the noisy ups and downs. It does this by using a unique method to calculate the opening, high, low and closing prices of each period. 

2. How To Calculate Heikin Ashi Candlesticks

Let’s understand how to calculate Heikin Ashi.

• HA Close

HA Close = (High + Low + Open + Close) / 4

The Heikin Ashi close is the average of the actual high, low, open and close prices for the given time period

• HA Open

HA High = (Prior HA Open + Prior HA Close) / 2

The HA open is the average of the open and close prices of the previous Heikin Ashi candle. 

• HA High

HA High = Maximum of (Current High, Current HA Open, Current HA Close)

The HA high is determined by selecting the highest value among the current high price, the current Heikin Ashi open price, and the current Heikin Ashi close price. 

• HA Low

HA Low = Minimum of (Current Low, Current HA Open, Current HA Close)

The HA low is founded by choosing the lowest value among the current low price, the current HA open price, and the current Heikin Ashi close price. 

3. How To Launch a Heikin Ashi Chart on TradingView

Here are the step-by-step instructions for launching a Heikin Ashi chart on TradingView:

• Go to TradingView and log in to your account
• Choose the market or asset you want to analyse by searching for it in the search bar
• Select your preferred timeframe
• On the chart, you will see the candlestick icon. Click on it
• A dropdown menu will appear. Choose ‘Heikin Ashi’ form the list
• The chart will now display in Heikin Ashi format. You can analyse the smoothed candlesticks to better understand price trends

4. Analysing Heikin Ashi Charts: The Basics

The basic signals that we can read from Heikin Ashi charts are:

• Trend Identification

Look for consecutive green Heikin Ashi candles, which indicate an uptrend. Consecutive red candles signal a downtrend. 

• Trend Strength

In a strong trend, green candles typically have no lower wicks, and red candles have no upper wicks. 

When you see both upper and lower wicks, it suggests the trend is losing momentum, indicating a potential weakening of the trend’s strength.

• Trend Reversal

Pay attention to changes in candle colour. A shift from green to red (or vice versa), especially when accompanied by small-bodied candles and long wicks, may indicate a possible trend reversal. 

Also Read: Keltner Channels: Your Roadmap to Price Trends in Crypto Trading

Endnote

Heikin Ashi charts offer a valuable tool for crypto traders in the crypto market, aiding in trend identification, assessing trend strength, and detecting potential reversals. By understanding how to calculate Heikin Ashi candlesticks and utilising TradingView to assess these charts, investors can gain insights into market movements with reduced noise. These basics of Heikin Ashi analysis provide a foundation for making informed trading decisions in the dynamic world of cryptocurrency.