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When you open a Heikin Ashi chart for the first time, you might wonder why the candles suddenly look so “tidy.” No noise, no wild wicks in both directions. Instead: clear blocks of color that show you at a glance where the market is currently trending. That is exactly the strength of Heikin Ashi. But that is also where the trap lies.
Heikin Ashi candles look like normal candlesticks, but they are not. They are calculated differently, they show you different information, and they require a completely different mindset. In this article, we look at what Heikin Ashi really is, how you can use this chart representation in futures trading, and which mistakes you must avoid at all costs.
What are Heikin Ashi candles?
Heikin Ashi comes from Japanese and means something like “average candle.” The name already reveals the principle: instead of representing real Open-High-Low-Close values (OHLC), Heikin Ashi works with smoothed average values.
The calculation works like this:
- Close = Average of Open, High, Low, and Close of the current candle
- Open = Average of Open and Close of the previous Heikin Ashi candle
- High = Maximum of High, Open, and Close of the current candle
- Low = Minimum of Low, Open, and Close of the current candle
The result: the candles smooth the price movement. Individual outliers are dampened, and the overall trend becomes visible. A series of green candles without a lower wick shows a strong uptrend. Red candles without an upper wick signal a clear downtrend. Candles with small bodies and wicks on both sides indicate uncertainty or a possible trend reversal.
Heikin Ashi vs. normal candlesticks
The most important difference: Heikin Ashi candles do not show you the real price. The open of a Heikin Ashi candle does not exist on the market in that way. The close is an average, not an actual closing price. This has massive consequences for your trading.
| Property | Normal Candlesticks | Heikin Ashi |
|---|---|---|
| Prices | Real OHLC values | Smoothed averages |
| Trend representation | Each candle independent | Smoothed, trend more clearly visible |
| Gaps | Shows real gaps | Gaps are smoothed out/disappear |
| Order placement | Possible directly on chart prices | Not possible (prices are not correct) |
| Noise | High, especially on small timeframes | Significantly reduced |
| Signal delay | None | Yes, due to smoothing |
For trend direction, Heikin Ashi candles are superior. For exact entries and exits, however, you always need the real price. Many traders therefore use Heikin Ashi as a trend filter on a separate chart and trade the actual entries on a normal candlestick chart.
Advantages of Heikin Ashi in futures trading
Why do experienced futures traders use Heikin Ashi? Because the futures market (especially the Nasdaq 100 / NQ) is extremely fast and volatile. On a 1-minute chart, you can completely lose track within a few candles. Heikin Ashi helps you not to lose sight of the big picture.
The most important advantages:
- Trend smoothing: You immediately see whether the overall trend is intact or weakening. This reduces impulsive counter-trend trades.
- Noise reduction: Individual red candles in an uptrend are “swallowed.” You stay in the trade instead of exiting at every pullback.
- Simple visual pattern recognition: Three types of candles. Large bodies without a counter-wick = trend. Small bodies with wicks = indecision. Color change = possible reversal.
- Fewer false signals: On fast timeframes, normal candles constantly create “reversal” patterns that turn out to be noise. Heikin Ashi filters out a large part of them.
Disadvantages and limitations of Heikin Ashi
Now for the downside. And it is important, because many beginners treat Heikin Ashi like the holy grail and overlook the fundamental weaknesses.
The delay: Due to the smoothing, Heikin Ashi candles react more slowly to price movements. When the color change occurs, the market has often already moved 5 to 10 ticks. In scalping, this can make the difference between a good and a bad entry.
No real OHLC: You cannot set limit orders, stop orders, or alerts on Heikin Ashi prices. The values do not exist on the market. Anyone who ignores this places their orders at prices that were never traded.
Hidden weakness: Heikin Ashi can make a trend look “healthy” even though it is already crumbling internally. Volume, delta, or order flow data can show a completely different picture. Those who rely only on Heikin Ashi miss important warning signals.
Gaps disappear: In futures trading (especially overnight or around economic data), gaps are relevant information. Heikin Ashi smoothes them away. You don’t see the gap, but the market still reacts to it.
Heikin Ashi strategies for futures traders
There are various approaches to integrating Heikin Ashi into your trading. Here are the most common ones that work in the futures sector:
1. Trend filter on a higher timeframe: Use Heikin Ashi on the 15-minute or 1-hour chart as a directional filter. If the candles are green and without a lower wick, you only trade long on the smaller timeframe. Conversely for red candles.
2. Color change as a warning signal: A color change from green to red (or vice versa) is not an automatic entry. It is a signal that the momentum is changing. Use it as a trigger to look for confirmations on your normal chart.
3. Doji candles as a pause signal: Heikin Ashi candles with a small body and wicks on both sides show indecision. In a strong trend, they are often just a pause. But if they occur after a long trend movement, they can mark the beginning of a correction.
4. Combination with volume: The most powerful combination. Heikin Ashi shows you the trend direction, volume confirms (or refutes) the strength. Rising volume with green candles without a lower wick = strong trend. Falling volume with the same candle appearance = caution, the trend is losing strength.
Setting up Heikin Ashi in NinjaTrader and ATAS
The setup is straightforward in both platforms:
NinjaTrader: Right-click on the chart, then open “Data Series.” Under “Price based on,” select “HeikinAshi.” Alternatively, you can add a second data series as an overlay to see Heikin Ashi and normal candles in parallel.
ATAS: Select “Heikin Ashi” as the chart type in the chart template. ATAS also offers the possibility to combine Heikin Ashi with footprint data. This way you see the smoothed trend representation and at the same time the real order flow within each candle.
A common setup error: many traders forget that they should not place orders on a Heikin Ashi chart. Make sure that your order entry chart always runs on normal candlesticks.
Typical mistakes in Heikin Ashi trading
After hundreds of conversations with traders, I repeatedly see the same mistakes:
- Placing orders on Heikin Ashi prices: This is the classic. The price on the Heikin Ashi chart is not the real market price. Your order will be executed at a completely wrong position.
- Using Heikin Ashi as the only tool: Without volume, without order flow, without context. This works in trending markets, but in sideways phases, you will be constantly tossed back and forth.
- Timeframes that are too small: Heikin Ashi on a 5-second chart makes little sense. The smoothing needs time to take effect. Below the 5-minute chart, the information content becomes thin.
- Trading color changes blindly: Not every change from green to red is a short signal. In a strong uptrend, individual red candles are normal pullbacks. Context is everything.
- Forgetting backtesting: Heikin Ashi strategies look fantastic on historical charts because the trends appear so clear. Test every strategy with real data and take the delay into account.
Who is Heikin Ashi suitable for?
Heikin Ashi is particularly suitable for traders who:
- Have problems staying in the trend and exit too early
- Lose track on fast charts
- Are looking for a visual filter that makes the trend direction clear
- Engage in swing trading or intraday trend following
Heikin Ashi is less suitable for pure scalping (too much delay) or for traders who work exclusively with limit orders at exact prices.
In the TPTE Academy, we use Heikin Ashi concepts in the Shogun system, among others, which combines Heikin Ashi with synthetic charts. The approach shows how powerful Heikin Ashi becomes when you use it not in isolation, but as part of a well-thought-out overall system.
Heikin Ashi as a building block, not a solution
Heikin Ashi is an excellent tool. But it is exactly that: a tool. Not a system, not an indicator, not a signal generator. It shows you the trend direction more clearly than normal candles. No more, no less.
You achieve the best results when you use Heikin Ashi as a filter and make your actual entry decisions based on real prices, volume, and order flow. If you learn over 12 to 18 months how to embed Heikin Ashi into a structured system, you will find that the clarity it brings to your chart analysis is priceless.
Would you like to learn how to use Heikin Ashi professionally in futures trading? Book a free initial consultation and we will look together at which approach fits your trading style.
