Heikin-Ashi Candlesticks

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Heikin-Ashi Candlesticks

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Description: Heikin Ashi Candlesticks, candle, hollow and filled candles, candle's shadow, candle bar, candle technical analysis

Heikin-Ashi (in Japanese means "average bar") candlesticks are a weighted version of candlesticks. In technical analysis, Heikin-Ashi candlesticks are used together with traditional candlesticks, although they can be used alone. The reason for Heikin-Ashi candlesticks is to filter small price fluctuations and volatility.

Traditional candlesticks are based on the current bar open, high, low and close prices. Heikin-Ashi candlesticks use the current bar open, high low and close prices as well, but, in addition the calculation are based on the previous bar close price and previous Heikin-Ashi candle open price.

Heikin-Ashi Open price is the middle point of previous candle and is calculated as

HA Open = ( [Previous HA Open] + [Previous Bar Close] ) / 2

Heikin-Ashi Close price is the average of the current bar:

HA Close = ( Open + High + Low + Close ) / 4

HA High and Low prices are highest and lowest from the current High, Low, HA Open and HA Close:

HA High = highest of (HA Open, HA Close, High, Low)
HA Low = lowest of (HA Open, HA Close, High, Low)

In technical analysis Heikin-Ashi candlesticks are used to generate signals. There are five main types:

Hollow Candle with no shadow - indicates a strong up-trend.
Hollow Candle - indicates an up-trend.
Candle with small body and both shadows - indicates a weak trend and a possibility of trend changes.
Filled Candle - indicates a down-trend.
Filled Candle with no shadow - indicates a strong down-trend

Chart 1: Main Types of Heikin-Ashi Candlesticks

Chart 2: NASDAQ 100 chart - Heikin Ashi Candlesticks

V. K.

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