Technical Glossary / Chart Types & Price Representation
Heikin Ashi Chart
A smoothed candle built from averaged prices, so the trend is easier to see and the real open and close are hidden.
Teaching sketch. It shows the shape, not a live quote and not a trade signal.
Formula
HA close = (open + high + low + close) / 4. HA open = (previous HA open + previous HA close) / 2. HA high and low are the extremes of the real high, real low, and those two averages.
Definition
Heikin Ashi means "average bar" in Japanese. Each candle uses the current period and the prior averaged candle. Runs of same-coloured candles with no lower wick often accompany a steady advance. The price on the candle is not the exchange price.
How it works
Averaging pulls the open toward the prior average, so gaps and single-bar reversals are damped. That is the point, and it is also the lag.
How to identify it
Candles that stay one colour for long stretches, with small or missing wicks against the trend. Compare with a normal candle chart of the same symbol: the Heikin Ashi close will not match the last traded price.
Bullish reading
A sequence of rising averaged candles, bodies near the high and little lower wick, describes a smooth advance. It is a description of the average, not a buy order.
Bearish reading
A sequence of falling averaged candles, bodies near the low, describes a smooth decline. The turn on this chart arrives after the real price has already turned.
How traders use it
Traders use it to stay with a trend and to ignore some flicker. Orders and stops still have to be priced off the real chart.
Common mistakes
Placing a stop at a Heikin Ashi low. That low may never have traded. Also treating the colour flip as an early signal. It is a late one.
Limitations
Heikin Ashi hides gaps, true wicks, and the actual close. It is a filter laid on top of OHLC, not a replacement for it.
This note explains the term. A sketch shows the shape of the idea. Neither is a recommendation, a signal, or a comment on any security. Indicator settings and exchange conventions differ. Check the live chart and the contract specification before you use a number.