The Heikin-Ashi chart is a candlestick type of chart with some unique characteristics for Forex Trading. A Heikin-Ashi chart uses a unique way of plotting each bar as you can see in the EURUSD chart below.
Heikin-Ashi Chart Advantages
Here are some advantages when trading using the Heikin-Ashi charts:
(1) The Heikin-Ashi charts make the candlesticks and trends to be easy identified
(2) Heikin-Ashi Candlesticks appear smoother and can filter the misleading market noise
(3) Heikin-Ashi Candlesticks can foreshadow trend reversals and quickly identify classic patterns
(3) Using the Heikin-Ashi Chart traders may identify trendlines, support and resistance, retracements etc
(4) Momentum oscillators and Volume indicators can be combined with the Heikin-Ashi Chart as with any other chart type
(5) There are no price gaps on a Heikin-Ashi chart
Heikin-Ashi Bars Formula
This is how the Heikin-Ashi chart plots its bars:
◙ Closing Price = Current Bar ( Open + High + Low + Close ) / 4
◙ Opening Price = Previous Bar [ (Open Bar) + Close) ] / 2
◙ High Price = Max Current Bar ( High, Open, Close )
◙ Low Price = Min Current Bar ( Low, Open, Close )
How to Trade using the Heikin Ashi Chart
Executing a trading order using the Heikin-Ashi chart is the same as using any other chart type. When it comes to placing a stop-loss and a take-profit level, traders must be very careful as the Heikin-Ashi chart presents different price levels than ordinary charts.
Applying the Heikin-Ashi chart on MetaTrader-4
Here is how you can apply the Heikin-Ashi chart on the MetaTrader-4 platform:
(1) Open any MetaTrader-4 platform
(2) Go the Chart View you want to apply the Heikin-Ashi
(3) Go to Menu → Insert → Indicators (first)
(4) Go to Custom (last) → Heikin-Ashi (middle)
(5) The Heikin-Ashi Box is now opened -Go to Input and change the 4 Colors (I use 2 Green and 2 Red).
Note: Use the Input and not the Color selection in order to apply the changes in all new charts.
That is all, now you can see any price chart from an alternative view.
◙ Heikin-Ashi Chart