Heikin-Ashi means "average bar" in Japanese. It is a candlestick chart. Unlike standard candlestick charts using open-high-low-close (OHLC) bars the Heikin-Ashi technique uses calculated values for the candles.
|Close equals the average price of the current bar|
|Open equals the midpoint of the previous bar|
|High equals the highest price of the set|
|Low equals the lowest price of the set|
Elimination of Noise
This indicator eliminates noise. So it prevents you from getting a lot of false signals. Compare the standard candlestick chart and the Heikin-Ashi chart:
Blue long candles with no lower shadows indicate a strong uptrend. Look at the strong uptrend on the chart below.
Red long candles with no upper shadows indicate a strong downtrend. Look at the strong downtrend on the chart below.
Reversal candles in the Heikin-Ashi charts look like Doji candlesticks. They have no or very small bodies, but long upper and lower shadows. Look at the reversal candles on the chart below.
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