Definition
Heikin Ashi
Heikin Ashi is a modified candlestick chart that averages prices to smooth out noise and make trends easier to read.
Heikin Ashi (Japanese for 'average bar') recalculates each candle using averages of the open, high, low, and close, producing smoother candles than standard ones. Long green candles with little lower wick suggest a strong uptrend; long red candles with little upper wick suggest a strong downtrend, and small-bodied candles hint at a pause or reversal.
Indian traders use Heikin Ashi on Nifty, Bank Nifty, and stocks to stay in trends and avoid being shaken out by minor pullbacks. The trade-off is that the averaging hides the true open and close, so it should not be used for precise entry or exit prices.
Related terms
- SupertrendSupertrend is a trend-following indicator that plots a line below price in uptrends and above price in downtrends, using ATR.
- Candlestick PatternCandlestick patterns are formations of one or more candles that suggest likely shifts in market sentiment.
- TrendlineA trendline is a straight line connecting a series of highs or lows to visualise the direction and slope of a trend.
- Renko ChartA Renko chart plots price as bricks of a fixed size, ignoring time, to filter noise and highlight the underlying trend.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.