The Heikin Ashi chart is not the end-all-be-all of trading that some people might wish that it was. It is an extremely useful piece of information that traders can benefit from, but you need to be careful not to assume that you only need this one piece of information to get everything that you need from the market. That is a mistake, and it is one that could be costly for you. There are some limitations to this chart type that we should talk about now.
The Candlesticks Don’t Reflect True Prices
The Heikin Ashi chart is showing you an average of prices, not the true prices themselves. This is a big deal because it means that you need to know what price you’re looking at. Since you can’t see the real open and close prices, some traders would rather use a Heikin Ashi chart as more of an indicator instead of strictly a price chart.
Make sure you always know what type of chart you are trading with, and understand that there are limitations to the Heikin Ashi chart that can’t be overlooked.
Actual Price Information is Disguised
You are looking at the average prices in the market, and those averages are only based off of recent price points. That means that the actual price of where the currency pair is trading can easily be disguised by this type of chart.
Be sure you’re conscious of the real closing price, and not just the average value.
Day Traders (and Scalpers) May Not Get the Price Responsiveness They Need from These Charts
The typical day trader may not do well if they try to use the Heikin Ashi chart to trade. Day traders are looking for very short-term moves in prices, and looking at the averages that are presented by a Heikin Ashi chart is not going to be as helpful for that purpose.
It’s not a huge issue for long-term swing traders or position traders, whose trades take a while to develop. For shorter-term traders like day traders and scalpers, Heikin Ashi just might not be responsive enough to make extensive use of.
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