The Heikin Ashi indicator is meant to be used to make trends easier to spot. Traders who use this are able to identify both trends that are already in motion as well as new trends that may be developing. Obviously, a great trader needs to be able to do both.
The basics of the Heikin Ashi are simple, but we should go over them anyway.
Green Candles are a Buy Signal
Green candles, particularly multiple green candles in a row, signal an uptrend is occurring.
Green Candles with No Wick are a Stronger Indication
If you see green candles that have no downward wick, this is an even stronger sign of an uptrend as it means that the price never dropped significantly. Traders only wanted to push it higher.
Candles with a Small Body May Indicate a Reversal
Candles that have a smaller body may be indicative of a trend that is about to come to an end. Traders appear uncertain about where they want to take the currency pair next, and this may mean that the prevailing trend has lost steam.
Red Candles Mean a Downturn is Coming
The opposite of a push higher is a push lower, and that is indicated by red candles. If you see many red candles lighting up your screen, it may be time to consider selling the pair or perhaps shorting it.
Red Candles with No Upper Wick Mean a Strong Downtrend
Red candles with no upper wick are periods of time when traders had no qualms at all about taking the currency pair even lower. They didn’t hesitate or pause, and this may indicate that a stronger downtrend is on the way. It is worth pausing to note this if those are the types of candles that you are seeing on your charts.
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