Heikin-Ashi Technique

AAA

DEFINITION of 'Heikin-Ashi Technique'

A type of candlestick chart that shares many characteristics with standard candlestick charts, but differs because of the values used to create each bar. Instead of using the open-high-low-close (OHLC) bars like standard candlestick charts, the Heikin-Ashi technique uses a modified formula:

Close = (Open+High+Low+Close)/4
Open = [Open (previous bar) + Close (previous bar)]/2
High = Max (High,Open,Close)
Low = Min (Low,Open, Close)

INVESTOPEDIA EXPLAINS 'Heikin-Ashi Technique'

The Heikin-Ashi technique is used by technical traders to identify a given trend more easily. Hollow candles with no lower shadows are used to signal a strong uptrend, while filled candles with no higher shadow are used to identify a strong downtrend.

This technique should be used in combination with standard candlestick charts or other indicators to provide a technical trader the information needed to make a profitable trade.

RELATED TERMS
  1. Bearish Abandoned Baby

    A type of candlestick pattern that is used by traders to signal ...
  2. Mat Hold Pattern

    A pattern found in the technical analysis of stocks that ultimately ...
  3. OHLC Chart

    Short for "Open, High, Low, Close chart." This is a securities ...
  4. Today's High

    A security's intraday high trading price. Today's high is the ...
  5. Closing Price

    The final price at which a security is traded on a given trading ...
  6. Today's Low

    A security's intraday low trading price. Today's low is the lowest ...
Related Articles
  1. Active Trading

    Trading Without Noise

    False signals can drown out underlying trends. Find out how to tone them down and tune them out.
  2. Forex Education

    Confirm Forex Momentum With Heikin Ashi

    Heikin Ashi smooths trends and makes them easier to identify.
  3. Charts & Patterns

    Heikin-Ashi: A Better Candlestick

    Enhance trend isolation and prediction of future prices with this technique.
  4. Chart Advisor

    Traders Look To Dividend Funds (VIG)

    When uncertainty creeps into the mind of an active trader it is not uncommon for this type of person to turn toward the safety of dividends.
  5. Trading Strategies

    Enter Trades Ahead Of The Emotional Crowd

    Traders profit in highly competitive markets by shifting their strategies backward or forward, entering positions ahead of or behind the emotional crowd.
  6. Chart Advisor

    4 Bullish Flag Patterns You Should Trade Now

    Here are four stocks with flag patterns, highlighting the various ways to trade this chart pattern.
  7. Chart Advisor

    These Transportation Stocks Are at a Crossroads

    These shipping and railroad stocks are testing resistance. A break above signals an emerging uptrend; a break lower, a continuation of the downtrend.
  8. Technical Indicators

    Trade This High Probability Bollinger Band Pattern

    Bollinger Band box patterns set up profitable opportunities when trends give way to well organized trading ranges.
  9. Trading Strategies

    Know How To Manage Gaps On Your Trading Strategy

    Gaps generate profitable strategies right after they print, as well as during retracements that test those levels, often months or years later.
  10. Charts & Patterns

    Why These Are 2015's Most-Promising Bank Stocks

    Which bank stocks should offer the best bang for your buck in 2015? Possibly these, so read on.

You May Also Like

Hot Definitions
  1. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  2. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  3. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  4. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  5. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  6. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
Trading Center