5 Rules of Heiken Ashi Candlesticks are key to price action strategy. Heiken Ashi Candlesticks are different from normal candlesticks. In Japanese, Heikin means Average or Balance and Ashi mean foot or bar.
The 2 key advantages of Heiken Ashi Candlesticks compared to normal candlesticks in price action strategy are as follows
1. You can identify the stock or index trend. Therefore, Heiken Ashi Candlesticks are more reliable and helps to take the right decision.
2. It cut the noise.
The calculations of open, high, low and close price point for Heiken Ashi Candlesticks are different from normal candlesticks. If an investor or trader is using Heiken Ashi Candlesticks for price action strategy then they should take care of following 5 rules
1. A Green long body with No lower shadow means a bullish trend i.e. there is strong upward momentum.
2. A RED long body with No upper shadow or wick means a bearish trend.
3. A consolidation Heiken Ashi Candlestick is formed when the size of the body is small and there are long upper & lower shadows or wick. It means either the trend will reverse or stock/index will continue existing trend after consolidation.
4. In case, the size of the body of the candle is decreasing then it means that existing trend is weakening.
5. In case of the bullish trend, if the candle has a lower shadow or during a bearish trend, if the candle has upper shadow/wick then it also implies that existing trend is weakening.
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