November 19, 2014

Heikin-Ashi Charts

A reader recently introduced me to Heikin-Ashi charts. Popular with forex traders for showing trends which at first look of chart sure seems that way. Look at these two daily charts. The top one is a standard Candlestick chart while the bottom is Heikin-Ashi chart.


The trend of unbroken green sure seems more obvious and stronger in the Heikin-Ashi chart. Will testing confirm this?

Explanation of Heikin-Ashi has a good explanation of Heikin-Ashi charts and the calculation.

Heikin-Ashi Candlesticks are an offshoot from Japanese candlesticks. Heikin-Ashi Candlesticks use the open-close data from the prior period and the open-high-low-close data from the current period to create a combo candlestick. The resulting candlestick filters out some noise in an effort to better capture the trend. … Heikin-Ashi Candlesticks are not used like normal candlesticks. … Instead, these candlesticks can be used to identify trending periods, potential reversal points and classic technical analysis patterns.

Testing Details

For these tests, the focus is on ETFs, for a change, with the testing dates from 1/1/2006 to 6/30/2014.

Daily Timeframe

Searching around, one common way to use Heikin-Ashi is by pairing it with MACD indicator. I tried several parameters and rules with MACD but could not come with anything that produced interesting numbers. Another indicator I saw paired with Heikin-Ashi is stochastics. Again everything I tried here did not lead to any interesting numbers.


Monthly Timeframe

Looking at a monthly timeframe on the SPY, the trends seem even more pronounced.


Time to test a simple strategy.

Heikin-Ashi Rules

Buy Rules

  • If the close of the monthly bar is green (Close greater than Open)
  • Enter on the open of the next monthly bar

Sell Rule


  • If the close of the monthly bar is red (Close less than Open)
  • Exit on the open of the next monthly bar


MA200 Rules (used for comparison)

Buy Rules


  • If the close of daily bar is above the 200 day moving average
  • Buy on the next day’s open


Sell Rule


  • If the close of daily bar is below the 200 day moving average
  • Sell on the next day’s open



For comparison I have added the results of ‘Buy and Hold’ and MA200 strategy from above. The reason to compare against MA200 is that what I use frequently as a long term trend indicator for my mean reverse strategies. Could Heikin-Ashi be a better long term trend indicator?



The Heikin-Ashi strategy outperforms the MA200 and Buy and Hold in all cases looking at all the metrics. Very impressive.




This is interesting. I was expecting Heikin-Ashi to shine on GLD but that is the one it did the worst with. For the other ETFs, it gave the best results.

Using monthly data on Heikin-Ashi seemed to be the trick on producing good results. Trying the same rules on daily data produced breakeven numbers at best. Not sure what I need to add to the rules to generate better results on daily data. I don’t like using monthly data when trading my daily strategies.


Fill the form below for a spreadsheet of results. In the spreadsheet I have included yearly results. Results from the following ETFS: GLD, IPE, IYR, KBE, KCE, KIE, KRE, TLT, XBI, XES, XHB, XLB, XLE, XLF, XLI, XLK, XLP, XLU, XLV, XLY, XME, XOP, XPH, XRT, XSD, SH, SDS, SPY, DIA, QQQ are also included.

Also included is the code in AmiBroker to produce Heikin-Ashi charts.

Final Thoughts

Have you used Heikin-Ashi charts on stocks? If so, how? It looks like there is something here that can be used for stocks but I need to keep searching. Any ideas to what to try next?


Good quant trading,




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Ilya Kipnis - November 19, 2014 Reply


Have you tried applying some standard indicators to the Heiken-Ashi transformed data? EG take the daily Heiken Ashi, and say, run an EMA crossover (say, 13/48), and compare it to its counterpart on daily data? Considering it’s designed for trend-following, then the hypothesis is that trend-following systems should perform better on Heiken Ashi transformed bars than on regular daily bars. So does an SMA200 on Heiken Ashi bars work better than SMA200 on daily bars? EMA crossovers? Channel breakouts? Etc.


    Cesar Alvarez - November 19, 2014 Reply

    These are good ideas. Something for me to consider for a follow up post.


joe pistell - November 19, 2014 Reply

Possibly a hybrid? Eyeballing the SPY chart, If SPY is above ma200 and Heikin-Ashi has been red for _x_ bars, then long SPY on 1st Heikin-Ashi green bar. Sell stop _x_ Heikin-Ashi bars.

The Whole Street’s Daily Wrap for 11/19/2014 | The Whole Street - November 20, 2014 Reply

[…] Heikin-Ashi Charts [Alvarez Quant Trading] A reader recently introduced me to Heikin-Ashi charts. Popular with forex traders for showing trends which at first look of chart sure seems that way. Look at these two daily charts. The top one is a standard C… […]

Luck: The Difference Between Hired or Fired – Flirting with Models™ - November 23, 2014 Reply

[…] read another blog post recently from Cesar Alvarez over at Alvarez Quant Trading on a Heikin-Ashi chart-based strategy.  The strategy design was fairly straight forward: using monthly Heikin-Ashi bars, go long after […]

Pete - January 9, 2015 Reply

Hi Cesar

How about changing the direction of your trade when there are two or three bars of the opposite colour, rather than jumping on the first one?

Eliot - June 21, 2016 Reply

I am working with HA paired with structure and Fibonacci analyses. The results are impressive. At the end of the day, support and resistance are the best buy signals. HA candles just confirm a possible reversal from a fib S/R.


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