Posted by forex at 7:36 AM
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1. Select Heikin Ashi from the drop-down indicator selection box on your charting software.
2. Study the new chart in your chosen time-frame. For this example, candlesticks with higher highs will be white and candlesticks with lower lows will be black. Colors will depend on your charting software settings. In a upward trend, you will see consecutive white candles, some of which will have a line, or shadow, below the main body. In a downward trend, you will see consecutive black candles, some of which have an upper shadow. When the trend strengthens you will see candlesticks with longer bodies and no lower or upper shadow in rising and falling trends, respectively. As the trend weakens, candlestick bodies shorten, and lower and upper shadows appear in upward and downward trends accordingly. Trending ranges see small bodied candlesticks with upper and lower shadows. A candlestick with a tiny body and long upper and lower shadows can indicate a change in market direction, but this is not reliable.
3. Confirm your trading decision by using at least one other indicator. For example, if you have decided to join a strong trend, perhaps look at the stochastic indicator for the same time period to see if it is moving upward, to support buying into a rising trend, or downward for a falling trend. If you think the market has changed direction, moving average indicators can be used to back up a trading decision to buy or sell in the new direction. A moving average crossing up through the price-line (formed by the candlesticks) supports a buy decision, whereas a moving average crossing down through the price-line supports a sell. A change of direction trade is also best taken after one or two further candlesticks have formed, confirming the new direction.