Heikin-Ashi Candles: Are they useful?

Hello Steemians! Today let us mix things up a bit. Rather than going through the usual chart let us look at a specific candlestick chart that I use in trading every day at all time scales. It is the Heikin-Ashi Candlesticks (HA, from now on). I have been using HA candles longer than I am using computer... yeah, that long. I used to be able to draw HA candles on a notebook by looking at a ticker-tape. I can't do that anymore, not that we need it anyways :) But just showing my nostalgia.

Candlestick charts are thought to have been developed in the 18th century by Munehisa Homma, a Japanese rice trader of financial instruments

from Wikipedia

So yes, they are an ancient technique. One of the many fine items we are indebted to the Japanese society. HA candles are a derivative product from the regular candlestick. Just because it is a derivative product, always remember that it is slower that regular candles. Similarly all indicators that are used in technical Analysis are slower than price, because they are derived from price. That is actually a good reason not to use them for any kind of fast trading.

So why do I use HA candles then?

It is sometimes necessary to slow things down in trading, especially shorter term trading, which in my case trading on signals based on 15-min chart. But the process is equally useful for position trades on daily chart. HA candles essentially averages or smooth out the noise of the regular candles. It is clearly evident from the price calculation listed above in the stockcharts link, but for most visual people, let us look at the BTC daily chart with HA candles:

We all know how noisy BTC daily chart is these days. I will post the regular candle chart just below to compare:

First item of note is how smooth the chart looks! When it is green it stays green, when it is red it stays red. That is the primary purpose of HA chart. Trade management, not entry necessarily, but management. Second item to note; that horizontal support and resistance lines are identical. Third: EMA relationship almost identical; so is oscillators.

So basically it is a smoothing operating, but let me tell you it is hell of a smoothing operation :) For example the April rally had been noisy, but check the HA chart and compare it to the regular chart in April for BTC, and observe how smooth the price action looks.

Hope you find some use of this tool.

Disclaimer: This is NOT professional advice, this is all just my own opinion and experience. I am NOT a Certified Financial Adviser. Consult professionals for any financial, accounting or legal related questions you have.

Charts are created in Tradingview.com, which is a free service