Reference Document PTN - 2

Japanese Candle Anatomy

High High

Close Open

Bull Bear
Candle Candle

Open Close

Low Low

A candle represents the entire range of price action during the time frame chosen. If these are “1 Hour Candles”, the
“Open” is the opening price at the beginning if the hour. The “High” is the highest price the market achieved during the
hour. The “Low” is the lowest price the market achieved during the hour. The “Close” is the price where the market was
at the end of the hour. At the beginning of the next hour, a new candle will form and the previous candle will remain on
our chart as a summary of the market’s price action the previous hour.

If price closes at a higher price than the opening price at the end of the hour, we have a Bull Candle – the base currency
is appreciating and price is rising.

If price closes at a lower price than the opening price at the end of the hour, we have a Bear Candle – the base currency
is depreciating and price is declining.

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Heiken Ashi Candle Anatomy Reference Document PTN - 2 Pg 2

High
Close
Open

Bull Bear
Candle Candle

Open
Close
Low

Buyers are clearly in control Sellers are clearly in control

The trends are not interrupted by false signals as often, and are thus more easily spotted using Heiken Ashi candles.
Unlike regular Japanese candles, Heiken Ashi candles do not show the typical open, high, low and close. Instead they
calculate values of each candlestick based on the dominant forces in the market (average price.) For example, if buyers
are clearly in control, Heiken Ashi candlesticks will be bullish (gray), even if a price bar closes higher than it opened. The
inverse is also true - if sellers are in control, Heiken Ashi candles will be bearish (black) , even if price closes higher than it
opened. These candles just have a little hash mark showing the open and close. Notice the open is on the left side of the
candle and the close is on the right side.

High High
Close Open

Trend Trend
Weakness Weakness
Open Close
Low Low

Notice here the bull candle now has a shorter body and a new wick has appeared at the bottom. This means the
strength of the upward trend has lost some steam. Similarly, in the bearish candle, a new wick has appeared and the
downward trend is losing steam. This means the trend is getting weaker and when the candle color has changed, the
trend momentum has changed. Study your charts and notice the characteristics of the Heiken Ashi candles at areas of
trend reversal. Also become familiar with candle patterns. They can indicate seeing possible trend reversals also.

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