I just learned more about Heiken Ashi candles and found them really useful for those who want to read charts more easily. This is a technical analysis tool originally from Japan, called the "Average Price" in Vietnamese, calculated from current and past price data.

The way Heiken Ashi candles work is quite interesting. Instead of using the open, close, high, and low prices directly, it recalculates them using averages. Specifically, the open price is taken from the average of the previous candle's open and close, the close price is the average of the four prices (open, close, high, low), and the highs and lows are also redefined. As a result, the chart appears smoother, similar to moving averages.

Therefore, Heiken Ashi candles have clear advantages. The smooth chart helps investors identify trends more accurately and filter out market noise. Entry signals are also safer and more precise. Additionally, the continuous green-red coloring makes it easier to read the chart compared to regular Japanese candles, especially suitable for timeframes of 15 minutes, 30 minutes, 1 hour, 4 hours, daily, or weekly.

But it’s not perfect. The main drawback of Heiken Ashi candles is that they do not display the exact current price. Since they are calculated based on the previous candle, they signal reversals more slowly, making them less suitable for strategies on 1-5 minute charts. Moreover, this tool is not ideal for active take-profit or stop-loss management.

When using Heiken Ashi to identify trends, you will see consecutive green candles when prices are rising. If the green candles have long bodies, long upper shadows, and short or no lower shadows, it indicates a prolonged uptrend, and you might consider placing a BUY order. Conversely, red candles with long bodies, long lower shadows, and short upper shadows suggest a strong downtrend, signaling a good time to SELL.

This tool also helps identify reversal signals through Doji candles. When a Heiken Ashi Doji (with short bodies, upper and lower shadows) appears, the market is temporarily pausing the current trend and may reverse. If it’s a green Doji, the market might switch from up to down, so consider selling. If it’s a red Doji, the market may reverse from down to up, so consider buying. However, note that Doji candles appear very frequently, so they are not always true reversal signals. To improve accuracy, you should combine them with other indicators to confirm signals before acting.