Heikin Ashi

Heikin Ashi

Heikin ashi is a form of candle stick chart and was created by the Japanese’s. Heikin ashi means “ average bar when translated from Japanese to English, this perfectly describes what the chart represents. Heikin ashi follows the same design and appearance of a standard candle stick chart, but it is better at showing trends in the market. Many trader use the Heikin ashi chart to see what the current trend is and when the current trend is slowing down or reversing.

Equation

close

The Heikin Ashi close is the average of the open, high, low and close divided by the current period. It is calculated using the following equation

Close – (open + high + low + close)/ 4

Open

The Heikin Ashi open is the average if the prior Heikin Ashi candlestick open plus the close of the prior Heikin ashi candle stick. It is calculated using the following equation

Open = (previous open + previous close)/2

High

maximum of three data points: the current period’s high, the current Heikin  ashi candle stick open or the current Heikin ashi close. It is calculated using the following equation

High = maximum of high, ha-open or ha close

Low

low is the minimum of three data points: the current period’s low, the current Heikin ashi candlestick open or the current Heikin ashi candlestick close. It is calculated using the following equation

low = minimum of low , ha open or ha close

Some people prefer to think of it as

Open –  (open/close)/2

High – The highest point of current

Low – the lowest point of current

Close – (open + high + low + close) / 4

Lagging indicator

The Heikin Ashi indicator is slower than a standard candlestick chart. This is due to the indicator being a lagging indicator. Hence it noting being a primary indicator for trend predicted movement.  Seeing that Heikin ashi is a lagging indicator it is great to use when you are looking at past trends in a market. It gives you a clear visual representation of the trends and trend size.

Written by James Ogunsanwo