What is Heikin Ashi and How Do You Calculate It?

How is Heikin Ashi calculated？

Let's have a look at how Heikin Ashi candlesticks are calculated and displayed on a graph.

As we discussed in the last session, they may seem to be conventional candlesticks to the untrained eye, but they are not.

It's similar to being able to distinguish between a wolf and a dog.

Isn't it beautiful and cute？ Does it appear to be innocuous？

Do you feel compelled cuddle it？

Is this a wolf or a Husky doggo？

You better be able to identify the difference between the two before you have your face chewed off and blood starts running everywhere, attracting a full wolf pack who will provide them with an all-you-can-eat buffet.

It's the same with Heikin Ashi charts and classic Japanese candlestick charts; if you don't know the difference, your trading account could wrap up in the red.

Each candlestick on a conventional Japanese candlestick chart indicates the price's open, high, low, and close for the current time period.

Each candlestick on a Heikin Aishi candlestick chart not only represents price movement in the current time period, but also price information from the past.

Let's take it one step at a time and look at how a Heikin Ashi candlestick is calculated.

First, let's look at a GBP/JPY Heikin Ashi chart for reference:

It looks similar to a conventional Japanese candlestick, but the open and closure are calculated differently.

Each Heikin Ashi candle has an open, shut, high, and low, just like a traditional Japanese candlestick.

This means that the Heikiin Aishi formula has FOUR parts:

A Heikin Ashi candlestick's OPEN is equal to the last candle's MIDPOINT.

If you go through the chart carefully, you'll notice that each new candlestick begins in the middle of the previous one.

[(Open price of previous candle) + (Close price of previous candle)] / 2 Open = [(Open price of previous candle) + (Close price of previous candle)]

Each Heikin Ashi candlestick's CLOSE represents the average value of the four parameters: open, close, high, and low:

(Open + High + Low + Close) / 4 = Close

Low = Lowest Price

The true high of the period is represented by the HIGH of a Heikin Ashi candlestick. The highest shadow, the open, or the close may be this. Whichever is the highest is the winner.

High = The Highest Price Achieved

The LOW of a Heikin Ashi candlestick represents the period's true low. The lowest shadow, the open, or the close might be this. Whichever is the least expensive.

Low = Lowest Price Achieved

The Heikin Ashi candlesticks' main purpose is to level out price fluctuations.

The Heikin Ashi candlestick chart reduces a lot of the market noise that an average Japanese candlestick charts exhibit.

The Heikin Aishi formula is summarized as follows:

Formula for Heikin Ashi:

High = The highest level of High, Open, or Close (whichever is highest) Low is the smallest of the three options: low, open, and close (whichever is lowest)

[Open (previous bar) + Close (previous bar)] = [Open (previous bar) + Close (previous bar)] (Open + High + Low + Close) / 4 = /2Close