In Heiken Ashi Trend analysis, these are two kind of candles; first is, Initiation Candle and Second is continuation candle. Initiation candle is one that sets the tone of Trend and defines underlying momentum for price. This is why Initiation candles are most important in Trend Analysis and Price action trading. Continuation candles are ones that reaffirm the direction of trend and are useful to increase positions in the direction of trend.
In the chart above, I have posted bullish candles and bearish candles. Let us take up bullish candles first. The first two candles that you see are Trend initiation candles. Look at the size of these candles with respect to their range. Clearly, these wide range candles represent underlying momentum and buyers interest. The last two Bullish candles that you see are trend continuation candles. These are smaller in size and reaffirm the direction of trend. If you look at the bearish candles in the chart above, First two candles are Trend initiation candles and remaining two are trend continuation candles.
When you begin price trend analysis, always look for initiation Heiken Ashi candles and then look for continuation candles.
Heiken Ashi Strategy – Identifying Strong Trend
In the chart below, let us see how a strong Down trend looks like. In Heiken Ashi, we should be measuring strength of move based on Initiation Candles (Candles that represent strong trend). If you look at the chart, all markings that I have done are that of Strong Initiation candles on the downside. When such candles are visible on the chart, invariably Price tends to move lower. Always keep range of Candle in mind. It should be wide with no upper shadows
In the chart below, I have marked out Strong Initiation Up Candles. These Candles represent Strong up trend and whenever such candles show up, one must pay attention to these. Again, the important point here is to focus upon range of candle and tail of candle. In a strong Up trending Candle, tail is always absent.
Whenever you trade with Heiken Ashi Candles, always start by identifying direction of Initiation Candles. This way, you will be trading in the path of least resistance.
Heiken Ashi Trading Strategy For Short & Longer Time Frame Charts
Heiken Ashi Expansion Pattern
Let me now introduce you to a very strong Heiken Ashi price action pattern. No matter which form of trading you do, keep a track of this pattern. If you look at the chart below, there are three expanding Heiken Ashi candle visible. The first candle is smaller than second candle and the second candle is smaller that third candle.
In price trend analysis, if you find this happening, then do take note of this as this is a high probability trending pattern wherein price continues to move in the direction of Trend. When price moves higher, there will be a pause in trend, but don’t sell positions during that.
You have to only sell if clear bearish Heiken Ashi candles start showing up. In this chart, you do see the expansion pattern at play on the downside.
IN THE NEXT POST I,LL COVER THE COMMON MISTAKES WHICH WERE DOING BY BEGINNER BY CHOOSING ENRTY AND EXIT POINTS. WITH SOME SOME MORE STRONG STRATEGY.
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JAI SHRI RAM 🙂
Very useful information provided by you sir. Please keep on posting these type of beginners educational information.
@Venkateswara_Reddy thank you and keep visiting on daily basis please and keep asking your doubts so that i can cover all the topics easily…!!!