Heikin Ashi Candlesticks

Heikin Ashi candlesticks filter out market noise from the traditional Japanese candlestick chart and highlight trend and/or consolidation patterns.

Trading Signals

Signals should be interpreted in the same way as on traditional candlestick charts. Long candles indicate a strong trend, while doji candles (and spinning tops) indicate consolidation that may warn of a reversal.

Long Lines

The long white line is a sign that buyers are firmly in control - a bullish candlestick.
A long black line shows that sellers are in control - definitely bearish.

Marubozu Candlesticks

Marubozu are even stronger bull or bear signals than long lines as they show that buyers/sellers have remained in control from the open to the close — there are no intra-day retracements.

Doji Candlesticks

The doji candlestick occurs when the open and closing price are equal.

An open and close in the middle of the candlestick signal indecision. Long-legged dojis, when they occur after small candlesticks, indicate a surge in volatility and warn of a potential trend change. 4 Price dojis, where the high and low are equal, are normally only seen on thinly traded stocks.

Example

Skyworks Solutions (SWKS) Pivot Point is first plotted with weekly Heikin-Ashi candlesticks.

And then with traditional Japanese candlesticks (weekly).

Heikin-Ashi candlesticks give a clearer depiction of the trend from late October 2014 and also of resistance at the $100 mark. Narrow consolidation below resistance is a bullish sign.

Setup

1. Select Indicators in the chart menu.
2. Select Heikin-Ashi Candlesticks in the left column of the Indicator Panel.
3. Select Daily or Weekly candles.
4. Save indicator to the right column [>>].

See Indicator Panel for further directions.

Heikin-Ashi Candlesticks Formula

Heikin-Ashi Candlesticks are calculated using smoothed values for Open, High, Low and Close:

• Heikin-Ashi Close is the average of Open, High, Low and Closing Price for the period.
• Heikin-Ashi Open is the average of the Heikin Ashi Open and Close for the previous candle.
• Heikin-Ashi High is the highest of three points for the current period:
  • The High
  • Heikin-Ashi Open
  • Heikin-Ashi Close
• Heikin-Ashi Low is the lowest of three points for the current period:
  • The Low
  • Heikin-Ashi Open
  • Heikin-Ashi Close