what does heikin ashi tell you 
the heikin ashi technique is used by technical traders to identify a given trend more easily hollow white or green candles with no lower shadows are used to signal a strong uptrend while filled black or red candles with no upper shadow are used to identify a strong downtrend reversal candlesticks using the heikin ashi technique are similar to traditional candlestick reversal patterns they have small bodies and long upper and lower shadows there are no gaps on a heikin ashi chart as the current candle is calculated using information from the previous candle because the heikin ashi technique smooths price information over two periods it makes trends price patterns and reversal points easier to spot candles on a traditional candlestick chart frequently change from up to down which can make them difficult to interpret heikin ashi charts typically have more consecutive colored candles helping traders to identify past price movements easily the heikin ashi technique reduces false trading signals in sideways and choppy markets to help traders avoid placing trades during these times for example instead of getting two false reversal candles before a trend commences a trader who uses the heikin ashi technique is likely only to receive the valid signal heikin ashi vs renko chartsheikin ashi charts are constructed based on averages over two periods renko charts on the other hand are created by only showing movements of a certain size while a renko chart has a time axis the boxes or bricks are not governed by time only by movement while a new ha candle will form every period a renko chart will only produce a new brick box when the price has moved a certain amount image by sabrina jiang investopedia 2020limitations of the heikin ashi techniquesince the heikin ashi technique uses price information from two periods a trade setup takes longer to develop usually this is not an issue for swing traders who have time to let their trades play out however day traders who need to exploit quick price moves may find heikin ashi charts are not responsive enough to be useful the averaged data also obscures important price information daily closing prices are considered important by many traders yet the actual daily closing price is not seen on a heikin ashi chart the trader only sees the averaged ha closing value in order to control risk it is important the trader is aware of the actual price and not just the ha averaged values another important element in technical analysis that is missing from heikin ashi charts is price gaps many traders use gaps for analyzing price momentum setting stop loss levels or triggering entries example using heikin ashi candlestickshieken ashi charts can be applied to any market and most charting platforms now have them included as a functionality there are five primary signals that identify trends and buying opportunities these signals may make locating trends or trading opportunities easier than with traditional candlesticks the trends are not interrupted by false signals as often and are thus more easily spotted image by sabrina jiang investopedia 2020the chart example above shows how heikin ashi charts can be used for analysis and making trading decisions on the left there are long red candles and at the start of the decline the lower wicks are quite small as the price continues to drop the lower wicks get longer indicating that the price dropped but then was pushed back up buying pressure is starting to build this is followed by a strong move to the upside the upward move is strong and doesn t give major indications of a reversal until there are several small candles in a row with shadows on either side this shows indecision traders can look at the bigger picture to help determine whether they should go long or short the charts can also be used to keep a trader in a trade once a trend begins it s usually best to stay in a trade until the heikin ashi candles change color however a change of color doesn t always mean the end of a trend it could just be a pause 