Posted By: TradersLog
Heikin-Ashi, meaning average bar in Japanese is a form of charting used to help identify trends and trend changes.
Candlestick charts are normally composed of a series of open-high-low-close (OHLC) bars set apart by a time series.
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)
Interpretation of Heikin Ashi Charts:
- Hollow candles with no lower shadow/wick indicates a strong uptrend, hold existing long positions.
- Hollow candles indicate an uptrend.
- One candle with a small body surrounded by upper and lower shadows indicates a trend change or indecision.
- Filled candles indicate a downtrend.
- Filled candles with no higher shadow/wick suggests a strong downtrend.