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Technical Indicators

Sat, Jun 7th, 2025
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The descriptions, formulas, and parameters shown below apply to both Interactive Charts and Snapshot Charts, unless noted. Please note that some of the parameters may be slightly different between the two versions of charts.
Studies noted with * are available only in Snapshot Charts and those noted with ^ are available only in Interactive Charts.
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Heikin-Ashi Smoothed Indicator

Indicator Type: Overlay

Chart Type: Interactive Charts Only

The Heiken Ashi smoothed indicator is a modified version of the regular Heiken Ashi candlestick charts. A product of Japan, the Heiken Ashi charts are ancient and were brought to the West only a few decades ago.

The Heiken Ashi is a type of chart used to analyze the price of a security. It belongs to the family of candlestick charts and was imported to the West from Japan. Unlike the regular candlestick charts, the Heiken Ashi candlesticks are used to understand the price trends.

This is done due to the way the price is calculated and displayed on the chart. Unlike the regular candlestick chart which shows the open, high, low and close of the price during a session, the Heiken Ashi chart takes a different view.

The open, high, low and close on the Heiken Ashi chart is calculated as follows:

  • Close = Open + High + Low + Close/4 – This is nothing but the average price of the session
  • Open = Open + Close/2 + Close – This is the average of the open and closing prices and the closing price of the previous session
  • High = Maximum value of the High, Open, Close
  • Low = Minimum value of the Low, Open, Close

What you can see from the above is that the Heiken Ashi price chart gives attention to both the high and the low as well as the closing prices. This leads to a different perspective on how the price is displayed on the chart.

The Heiken Ashi chart can be applied to any market and to any time frame. It behaves the same way as you would expect a regular candlestick chart to work.

Difference between regular Heiken Ashi and the Smoothed Heiken Ashi chart

You might come across claims that the Heiken Ashi smoothed indicator is a better indicator type compared to the regular Heiken Ashi indicators. While you can typically use the regular Heiken Ashi chart all by itself, the Heiken Ashi Smoothed indicator is added as an overlay on the regular Heiken Ashi candlestick chart. By doing so, traders believe that this will give a better perspective of the markets.

Heikin-Ashi Smoothed

When price is trading above the Heiken Ashi Smoothed indicator, it is said to be bullish and when price trades below the Heiken Ashi Smoothed indicator, it is said to be bearish.

But the main difference between the regular Heiken Ashi indicator and the Heiken Ashi smoothed indicator is that the second type of indicator plots the Heiken Ashi candlesticks as a moving average.

Thus, you can see both the regular candlestick or bar chart alongside the Heiken Ashi Smoothed indicator.

Parameters:

The settings for the smoothed Heiken Ashi indicator is very simple. You can set the values of the two moving averages that are used. The MA Method means the type of moving average you want to use.

  • Smoothing1 (EMA): Choose the moving average type to use in the calculation (MA, EMA, SMA, WMA, HMA)
  • Period1 (10): The number of bars to use in the first moving average calculation
  • Smoothing2 (EMA): Choose the moving average type to use in the calculation (MA, EMA, SMA, WMA, HMA)
  • Period2 (10): The number of bars to use in the second moving average calculation

You can also identify the colors of the candles

  • Up Bullish Candle (Green)
  • Down Bearish Candle (Red)
  • Unchanged Neutral Candle (Blue)
  • Border (Black)
  • Wick (Grey)

Interpretation:

The general rule of thumb is that the markets are in an uptrend when the smoothed Heiken Ashi indicator is bullish or green, and the markets are in a downtrend when the smoothed Heiken Ashi indicator is bearish or red.

Buy and sell signals are generated based on this rather simple observation. You can see that the smoothed Heiken Ashi indicator shows the rising and falling trends with relative ease. But this is something that even moving average show as well, with the exception of the lines compared to the candles that are shown from the smoothed Heiken Ashi indicator.

Heiken Ashi Smoothed Indicator uses

One of the major rules of using this indicator is in determining the trends in the markets. It is a widely accepted principle that the trends change when you see two or more Heiken Ashi smoothed candlestick in the opposite direction or color. This is where traders either prepare to take an entry in the direction of the trend or the color or they can use this to adjust their stops.

As a result, you can expect the Heiken Ashi Smoothed indicator to work as the same way of using two moving averages. Bullish and bearish signals are generated when the moving averages mark a golden cross (the short term moving average cutting across the long term moving average to the upside) or the death cross (the short term moving average cutting across the long term moving average to the downside).

But as with any trading strategy, using just one indicator will not give you the market perspective. This is the same case with the Heiken Ashi smoothed indicator as well. You will probably need to use other technical indicators such as oscillators to determine the momentum in the price of a security.

In this method, after you are in the market with an open position, the stops are adjusted to a few pips above or below the highs and the lows of the Heiken Ashi smoothed indicator.

This is a great way to trade the markets especially when the trend is strong. Instead of the traditional fixed risk to reward ratio, with the use of trailing stops, you are able to capture the market profits that come your way.

However, to the downside, any adverse movements such as strong pin bars could abnormally cut you out of a position. By this time, you are left with small profits due to the abnormal price action while the trend resumes.

This could lead traders into taking new positions but at a bad time during the trend and could risk losing much more than what you initially gained.

Heiken Ashi Smoothed indicator – Conclusion

In conclusion, the Heiken Ashi smoothed indicator is a versatile trading indicator that can be used to build a new trading strategy or it can also be used to compliment your existing trading strategy.

The key is to not use this indicator alongside other indicators which depict the same market information. Therefore, if you are using moving averages, then this indicator doesn't give you any additional information.

However, you can look at replacing the moving averages with this indicator. The Heiken Ashi charts are a great way to get a different perspective of the markets. It can help you especially when the trends are strong and can also depict ranging markets when you can see the Heiken Ashi candlesticks changing color but price trading flat.

Source: https://www.perfecttrendsystem.com/blog_mt4/en/heiken-ashi-smoothed-indicator

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