The Heikin Ashi chart presents a different way of viewing Candlesticks, displaying more clearly uptrends, downtrends, and consolidation.
One of the strengths of the Candlestick as an indicator, is that it has no lag in relation to the price (it is itself). The delay, or lag, is a characteristic present in most indicators that are based on averages. On the other hand, because it is the price chart itself, there is a lot of noise. The immediate consequence is that the Candlestick chart on its own does not define a trend.
The Heikin-Ashi method (Heikin means average or balance, and Ashi means leg, or the price bar) is a technique that eliminates much of the candlestick's irregularities. It allows you to better visualize a trend or consolidation move. Instead of using moving averages, it is the prices that form the candle that are changed.
The chart is made up of several figures called candles, which consist of the body and its shadows, representing the Close, Open, High and Low.
Check out the formulas below (prefix ha = Heinkin-Ashi price):
- haClose = (Open + High + Low + Close)/4
- haOpen = ((haOpen(previous bar) + haClose(previous bar))/2
- haHigh = Maximum(High, haOpen, haClose)
- haLow = Minimum(Low, haOpen, haClose)
In other words,
- The closing price (haClose) is the average of the 4 prices of a normal candle.
- The opening price (haOpen) is the average of the previous opening (haOpen) and closing (haClose) prices.
- The maximum price (haHigh) is the greater of the maximum (normal) price, haOpen and haClose.
- The price of minimum (haLow) is the smallest between the minimum (normal) price, haOpen and haClose.
To select this chart type, click on the clock icon in the chart window:
Availability: Chart Pattern: Heikin Ashi can be used with the BlackArrow Free, One, Plus, Pro, and Ultra plans.
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