As mentioned in a previous lesson, using a Heikin Ashi chart makes trends easier to identify.
Heikin Ashi allows traders to look for the emergence of new trends or for the reversal of already existing trends.
Here are five basic ways to use Heikin Ashi charts in your trading.
1. Green candlesticks signal an uptrend.
When the Heikin Ashi candle changes from red (bearish) to green (bullish), it’s a sign that the price might be about to turn higher.
If you’re currently in a short position, you may want to exit.
If you’re currently in a long position, you may want to add to your position.
2. Green candlesticks with no lower shadow or wick indicate a strong uptrend.
If you see a lot of green shaved bottoms, you’ll see a strong uptrend.
Stay long and until the Heikin Ashi candlestick changes color, from green to red.
Ride the uptrend as long as no lower shadows appear and let your profits run.