Heikin-Ashi chart
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Heikin-Ashi is a Japanese trading indicator that means "average pace."[1] Heikin-Ashi charts resemble candlestick charts, but have a smoother appearance as they track a range of price movements, rather than tracking every price movement as with candlesticks. Heikin-Ashi was created in the 1700s by Munehisa Homma,[2] who also created the candlestick chart. These charts are used by traders and investors in stock, bond, futures, cryptocurrency and forex markets to help determine and predict price movements.[3]
Similarly to candlesticks, Heikin-Ashi has a body and a wick on its candles, however, they do not have the same purpose as on a candlestick chart.[4] The close of a Heikin-Ashi candle is calculated by the average price of the current bar or timeframe, e.g. a daily timeframe would mean that each bar represents the price movements in that specific day. The formula for the close of the bar or candle is calculated by 1/4 (open + high + low + Close).[5] The open of a Heikin-Ashi starts at the midpoint of the previous candle, it is calculated by the (open of previous bar + the close of the previous bar) 2.[6] The highest and lowest price point is represented by wicks similarly to candlesticks.[1]
The main purpose of a Heikin-Ashi chart is to show the general trend of the price (direction of price) and the strength of each trend,[7] this is represented simply by the wicks or (shadows), these are small lines that stick out from the main body of the candle[8] a series of candles that are going up and have no lower wick signifies a strong uptrend and vice versa with candles going down with no upper wick.[9]A doji on the chart signifies a possible change in the price trend.
Heikin-Ashi is used by many traders and is normally paired with other indicators to indicate long (buy) and short (sell) positions.[7]
References
- ^ a b Kuepper, Justin. "Heikin-Ashi: A Better Candlestick". Investopedia.
- ^ "Heikin-Ashi Technique Definition and Example".
- ^ "Heikin Ashi Chart Basics".
- ^ "Heikin Ashi Chart Basics". The Balance.
- ^ Mitchell, Cory. "Heikin-Ashi Technique Definition and Example". Investopedia.
- ^ "What Is The Heiken Ashi Indicator And How Do You Use It?". Admirals.
- ^ a b "How to Use a Heikin Ashi Chart". BabyPips.com. April 19, 2020.
- ^ "How to Use a Heikin Ashi Chart". 20 April 2021.
- ^ "Heikin-Ashi [ChartSchool]". school.stockcharts.com.