Heikin Ashi

Heikin Ashi (Japanese for "average bar") is a candlestick variant that smooths price to make trends easier to see. It looks like candlesticks but the values are calculated, not raw.

How it is built

Each Heikin Ashi candle averages current and prior prices rather than plotting them directly:

• The close is the average of the current open, high, low and close.
• The open is the average of the previous Heikin Ashi candle's open and close.
• High and low use the extremes of the period and the smoothed open/close.

The effect is that consecutive candles flow into each other, filtering out a lot of noise.

How to read it

• A run of same-colour candles with little or no opposite wick signals a strong, clean trend — green for up, red for down.
• Small bodies with wicks on both sides signal a pause or possible reversal.
• A change of colour suggests momentum may be shifting.

The crucial limitation

Because the values are averaged and smoothed, the prices shown are not the real market prices. A Heikin Ashi close is not a price you can actually trade at. So Heikin Ashi is excellent for reading trend and staying in a move, but you must place entries, stops and targets using real candlestick or bar prices — never off the smoothed values.