Hello everyone. I am grateful to all the professors for delivering the amazing lectures every week. This week, we have learned about the Heikin-Ashi strategy. After reading the lecture, i am going to do my homework task for professor @reddileep.

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Q.1) Define Heikin-Ashi Technique in your own words.

In trading world, we use multiple techniques for trend determination. These techniques help the traders to trade in more profitable way. The Heikin-Ashi is one among them.

There are multiple candles in candlestick chart and all these candles are independent to each other. There is no link between the candles in the candlestick chart.

Heikin-Ashi is a Japanese word which mean is "Average bar". This technique use the Heikin-Ashi candlesticks . This technique help the traders to determine the market trend. When the price of the coin change multiple time, it become messy and complicate. The frequent change in the price make the market noisy and the it become hard to find the market trend and the average price of the coin.

In this case, it become hard for the traders to get the idea about the market trend. The Heikin-Ashi technique help to determine the market trend by eliminating the noise which occur due to change in the price of coin. It provide a smooth and clear look of the chart and traders can easily find out the price trend of the asset.

In the Japanese candlestick chart, we see that even if a slighter change occur in the market, the change show on the chart. You will see the change in color of the candles. As we know that the price of the coin change frequently, so change in the color of candle make the chart complicate to determine the trend. But if we see the Heikin-Ashi technique, here the color of the candles change only when there is clear change in the market trend.

When the Selling pressure is high then we will see that the price is declining hugely. In such cases, the market will trending downward. But in the other case, if the buying pressure is high then we will see that the price will raise upward. In such cases the market will trend clearly in upward.

In this technique, each next candles is represented by calculating some data from the previous candle. So these candles are linked with each other. The high, low, open and close prices of the previous candles are used to represent the next candle.

The Heikin-Ashi is more smooth and clear. This technique provide a clear way to determine the market trend. Here the price which is shown on the chart is not the current price of the coin. Here the price shown on the chart is average out price.

Q.2) Make your own research and differentiate between the traditional candlestick chart and the Heikin-Ashi chart. (Screenshots required from both chart patterns)

The heikin-Ashi chart is different from the candlestick chart. In candlestick chart, the chart show you the live price but in heikin-Ashi, the chart show the average out price. The heikin-ashi chart is more simple and clear. The traders can get the trend idea easily by looking at the chart. The group of same color candles show the trend; it might be bullish or bearish. Here the colors of candle is not change frequently but change when there is clear change in trend.

But in candlestick chart, the color of candles change frequently with a slighter change in price. So here the chart become complicated and traders cannot determine the trend in clear way. The following table may give you a clear look about the difference between the heikin-Ashi and candlestick chart.

Traditional candlesticks	Heiken-Ashi
In Candlestick chart, when a slight change occur in the market trend, the color of candles get change. The low and high in the price and frequent change in the candle's color make the chart more complex and the traders find it hard to get the idea about the market trend	In Heikin-Ashi technique, The candles's color change only when there is a clear change in trend. So the chart is more simple, clear and smooth. The traders get idea easily and in fast way about the market trend.
The chart become noisy because of complicated look. Thus hard to determine the market trend	The chart is simple and clear, so traders get idea easily from the chart about the market trend.
The color of the candles change with a slighter and minor change in the market trend. With a small and light buying and selling change of the coin effect the color of the chart and the color get change.	The color change only when there is a clear change in the market trend.
Opening, Closing , lowest and highest price of coin for a specified time period is use in the candlestick chart	The average high, low, opening and closing price is used.
The pattern of candles is use to determine the trend	The same color candles show a trend. If there is green color, it mean this is uptrend and if there are red colors, it mean the trend is downward.
The candles are independent from the previous candles	The candles depend upon the previous candles

The candles use for longer and smaller time period and work equally efficiently. It work well for all the time duration. The candles use for longer and smaller time period and work equally efficiently. It work well for all the time duration.	The heikin-Ashi technique work well when the time period is longer. Because when the time duration is longer, then there will be a clear look on the trend changing.
You will get the actual current price of the asset.	You will get the average out price of the asset. Here you the price you get is not current price of the coin.

Q.3 ) Explain the Heikin-Ashi Formula. (In addition to simply stating the formula, you should provide a clear explanation about the calculation)

The heikin-Ashi ha the data of the 4 type. These are the follow

• Heikin-Ashi Open
• Heikin-Ashi Close
• Heikin-Ashi High
• Heikin-Ashi Low
  

Heikin-Ashi Open

To calculate the opening price of the current bar, take the opening and closing price of the previous bar. Then divide the answer by the 2. So next bar will be the mid of the previous bar as we have got it by dividing the opening and closing of previous bar by 2.

Formula

Heikin-Ashi Opening= Opening_prev+ Closing_prev /2

Suppose if the opening price= 0.13

And Closing price= 0.17

Heikin-Ashi opening= 0.15

Heikin-Ashi Closing

This is calculated by adding the high, low, open and closing price of the current candle. Then divide the answer with 4.

Formula

Heikin-Ashi closing = heikin-Ashi- Opening+ Heikin-Ashi Closing+ Heikin-Ashi High+ Heikin-Ashi Low /4

Opening price= 30.7013$

Closing price=40.6373$

High price=41.4932$

Low price =15.8149$

30.5994+40.6373+41.4932+15.8149/4= 32.16

Heikin-Ashi High

The heikin-Ashi high is equal to the highest level of closing, opening or high of the current candle.

Formula

Heikin-Ashi High = Maximum of the high, Heikin-Ashi Open or Heikin-Ashi Close of current candle

^{Heikin-Ashi chart showing high price which is 41.5007}

Heikin-Ashi Low

The heikin Ashi low is oppsite to the heikin-Ashi High. Here the low is equal to the lowest value of the open, close and low points of the current candle.

Formula

Heikin-Ashi Low = Minimum of the low, Heikin-Ashi Open or Heikin-Ashi Close of current candle

^{Heikin-Ashi chart showing high price which is 15.8223}

Q. 4- Graphical explanation of trends and its buying opportunities through the Heikin-Ashi Candles. (Screenshots required)

The market trend keep changing. The candles on the candle stick chart have two colors by default. Red and green. The red colors show the selling pressure is high and green color show that the buying pressure is high.

Bullish trend

The green color candles shows that the price is rising up. The green color candles represent that the market is trending upward. When you see the series of the green candles on the chart, there is the bullish trend in the market. The candles in bullish season raise upward

Bearish Trend

When you see the red candle in a series, it mean that the market is in downtrend. This show that the selling pressure is high and price is declining. The candles in Bearish season move downward.

It is so simple to determine the market trend with heikin-Ashi technique. The chart is simple and clear. You can determine the trend by just seeing the direction of the candle. When you see the candles rising upward, it mean that the traders are showing interest in investing the coin. The buying ratio is high. In this case the demand raise and price also increase. The market is in uptrend in this case.

When the candles are moving downward, it mean that the investors are selling their investment. The selling ratio is high and price is declining. The market is at bearish trend in this case.

Q. 5 Is it possible to transact only with signals received using the Heikin-Ashi Technique? Explain the reasons for your answer.

There are multiple technique which we use to analyze the market. But no technique give you the 100% accurate result. There is always some flaws in every technique. SO we cannot say that the technique which we are using is best and 100% accurate. Same in case of the heikin-Ashi technique. This technique is good, easy to understand but not 100% accurate. You can analyze the market in an easy way just by seeing the direction of the candles.

If candles are moving upward, it mean that market is rising up. If candles are moving down, it mean that the market is trending ownward. But still there are some flaws in this technique. There are multiple reason for this statement. The first and most important is that sometime, this technique give you the wrong signal.

The more important point which miss in heikin-Ashi technique is Gap. The gap are misisng in the Heikin-Ashi technique. This technique give you good signals but here the current price of the candle is not shown. The average out price is shown.

This technique is useful for longer time frame. When you want to analyze the larger market, this technique work better in that case. But when the time frame is short, this technique not work more efficiently.

You cannot analyze the market on the base of the closing price. As we study that the current price is not shown but the average out price is shown here. Similarly the closing price is not given but the average closing price is presented here.

Q. 6 By using a Demo account, perform both Buy and Sell orders using Heikin-Ashi+ 55 EMA+21 EMA.

I added two EMA. Set their length as per 55 and 21.

Buying order

In the above graph, we can see that the market is rising up. The market is trending upward. The candles are moving above than EMA 21 and EMA 55. I will set the stop lose and take profit and then will place the buy order. I will buy the coin

Selling Order

In the above graph, we can see that the market is moving downward. The market is trending downward. The candles are moving below than EMA 21 and EMA 55. After seeing this situation, i will sell my coins.

Conclusion

The Heikin-Ashi technique help to determine the market trend. This technique help the trader to examine the market trend by filtering out the noise in the chart. When the price of the chart change multiple time, the chart become messy and noisy. The Heikin-Ashi technique help to reduce this noise from the chart and make it simple for the traders to determine the trend.

This technique is useful for long time duration and make the chart smooth and clear. I am thankful to the professor @reddileep