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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 to help determine and predict price movements.[3]

difference between traditional candlestick chart and Heikin-Ashi chart

Like standard candlesticks, a Heikin-Ashi candle has a body and a wick, however, they do not have the same purpose as on a candlestick chart.[4] The last price of a Heikin-Ashi candle is calculated by the average price of the current bar or timeframe (e.g., a daily timeframe would have each bar represent the price movements of that specific day). The formula for the last price of the Heikin-Ashi bar or candle is calculated by: (open + high + low + close) 4.[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 points are 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] these are represented by the wicks: small lines that extend from the main body of the candle.[8] A series of candles rising with no lower wick signifies a strong uptrend, and vice versa with candles falling with no upper wick.[9] A doji signifies a possible change in the price trend.

shows direction and trend of price

Heikin-Ashi is normally paired with other indicators to indicate long (buy) and short (sell) positions.[7]

References

  1. ^ a b Kuepper, Justin. "Heikin-Ashi: A Better Candlestick". Investopedia.
  2. ^ "Heikin-Ashi Technique Definition and Example".
  3. ^ "Heikin Ashi Chart Basics".
  4. ^ "Heikin Ashi Chart Basics". The Balance.
  5. ^ Mitchell, Cory. "Heikin-Ashi Technique Definition and Example". Investopedia.
  6. ^ "What Is The Heiken Ashi Indicator And How Do You Use It?". Admirals.
  7. ^ a b "How to Use a Heikin Ashi Chart". BabyPips.com. April 19, 2020.
  8. ^ "How to Use a Heikin Ashi Chart". 20 April 2021.
  9. ^ "Heikin-Ashi [ChartSchool]". school.stockcharts.com.
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