Heikin-Ashi Technique

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)

BREAKING DOWN '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. Upside Tasuki Gap

    A candlestick formation that is commonly used to signal the continuation ...
  2. Bullish Abandoned Baby

    A type of candlestick pattern that is used by traders to signal ...
  3. Bearish Abandoned Baby

    A type of candlestick pattern that is used by traders to signal ...
  4. Downside Tasuki Gap

    A candlestick formation that is commonly used to signal the continuation ...
  5. Evening Star

    A bearish candlestick pattern consisting of three candles that ...
  6. Bar

    A graphical representation of a stock's movement that usually ...
Related Articles
  1. Charts & Patterns

    Heikin-Ashi: A Better Candlestick

    The Heikin-Ashi technique modifies the open-high-low-close series that most candlestick charts use, thus making trends easier to spot.
  2. Charts & Patterns

    Heikin-Ashi: A Better Candlestick

    Enhance trend isolation and prediction of future prices with this technique.
  3. Charts & Patterns

    Candlestick Charting: What Is It?

    Discover the components and basic patterns of this ancient technical analysis technique.
  4. Trading Strategies

    Technical Analysis: Chart Types

    By Cory Janssen, Chad Langager and Casey MurphyThere are four main types of charts that are used by investors and traders depending on the information that they are seeking and their individual ...
  5. Forex

    Chart Basics (Candlesticks)

    The use of candlestick charting in forex
  6. Forex Education

    Standard Candlestick Chart

    Candlestick charts can look confusing but they are actually quite simple and easy to understand.
  7. Forex Education

    Individual Candlestick

    Candlestick charts can look confusing but they are actually quite simple and easy to understand.
  8. Active Trading

    Star Formations Spotlight Luminary Trades

    Morning, evening and doji stars will have you basking in better trading profits.
  9. Active Trading

    Range Bar Charts: A Different View Of The Markets

    While range bars are not a type of technical indicator, traders can employ this useful tool to identify trends and interpret volatility.
  10. Charts & Patterns

    The 5 Most Powerful Candlestick Patterns (NUAN, GMCR)

    Statistics show unusual accuracy for the buy and sell signals of certain candlestick patterns like abandoned baby, evening star, and three black crows.
RELATED FAQS
  1. What are the differences between a bar chart and candle sticks?

    Explore the difference between bar and candlestick charts. Learn how technical analysts use charts in the analysis of supply ... Read Answer >>
  2. What do the different colored candlesticks mean?

    Candlestick charts have been used in Western trading for many years and are a very popular method of plotting the price action ... Read Answer >>
  3. What do you call a candlestick with no shadows, and what does it mean?

    A candlestick with no shadow is regarded as a strong signal of conviction by either buyers or sellers depending on whether ... Read Answer >>
  4. How do I implement a forex strategy when spotting a Rising Three Methods Pattern?

    Learn how to implement a forex trading strategy designed to profit from a trend continuation signal given by the rising three ... Read Answer >>
  5. What are the main disadvantages of using an Equivolume Chart?

    See why the innovative design of EquiVolume price charts creates some inherent disadvantages for traders who are used to ... Read Answer >>
  6. What are the main differences between an Equivolume chart and a Candlestick chart?

    Read about the similarities and differences between how trading information is conveyed in Japanese candlestick charts and ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center