Heikin Ashi Charts

Heikin Ashi charts are constructed very similar to candlestick charts. The difference is that instead of the normal Open, High, Low and Close prices, like in a candlestick chart, the Heikin Ashi chart uses transformations of these prices. The plotting with this transformed prices is then done in the same way as for normal candlestick charts (see Finance Charts).

The Heikin Ashi transformations also use values from the previous candle:

Heikin Ashi Value

Transformation

Description

H-Close

(Open+High+Low+Close)/4

Average price of the current candle

H-Open

(Open[1] + Close[1])/2

Midpoint of the previous candle

H-High

Max(High, H-Open, H-Close)

Highest value of the given list

H-Low

Min(Low, H-Open, H-Close)

Lowest value of the given list

Because it also uses past data for calculating the current candle, a Heikin Ashi chart reacts a bit slower as a normal candlestick chart. On the other hand, it can be read more easily because an uptrend shows only candles with an unfilled body, and a downtrend only candles with a filled body.

The usual candlestick patterns also apply to Heikin Ashi charts. In addition, it is believed that unfilled candles with no lower shadow signal a strong uptrend, and filled candles with no upper shadow signal a strong downtrend.