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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)
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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.
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Heikin Ashi smooths trends and makes them easier to identify.
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Enhance trend isolation and prediction of future prices with this technique.
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False signals can drown out underlying trends. Find out how to tone them down and tune them out.
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