Heikin Ashi Candlesticks Explained For Beginners

Heikin Ashi Candlesticks

Most day traders prefer to use candlestick charts for their analysis, but most have not heard of the Heikin Ashi candlesticks.

Heikin Ashi candlesticks have recently gained popularity by day traders to identify a given trend more easily.

They look pretty similar to Japanese candlesticks at the first glance, but there are still some significant differences between them.

In this post, we are going to discuss Heikin Ashi candlesticks, how these modified candlesticks work, and how you can use them to give you a different unique perspective and maybe change the way perform your chart analysis.

What are Heikin Ashi candlesticks?

Heikin Ashi (sometimes spelled Heiken Ashi candlesticks) are a special type of Japanese candlesticks that are calculated from a combination of current and previous session’s price data.

The term “Heikin Ashi” simply means  “average bar” in Japanese. Heikin Ashi charting technique was developed in the 1700s by a Japanese trader called Munehisa Homma.

Heikin Ashi Candlesticks

If you look carefully at the Heikin Ashi candlestick chart above, you can see is similar to a normal Japanese candlestick but the open and close are calculated differently.

Heikin Ashi looks very similar to the usual Japanese candlesticks, but there are some differences between the two.

One of the most obvious differences between Heikin Ashi charts and Japanese candlesticks is the calculation of the opening and closing prices.

Instead of using the current bar’s open, high, low, and close to build the bar, Heikin Ashi candlesticks are formed by combining the midpoint of the previous bar with the open, high, low, and close of the current bar.

A green bar means the average closing price of the previous six bars is in the higher 50% of its range, indicating a bullish bias. The opposite is true of the red bars.

Importance of Heikin Ashi candlesticks

Heikin Ashi charts make candlestick charts more readable for traders who want to know when to get out of a trade when the trend weakens and when stay in and ride a strong trend.

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