HA (Heikin-Ashi Chart)

HA (Heikin-Ashi Chart) is an indicator developed in Japan in 1990s. Heikin-Ashi means average bar in Japanese. It looks very much alike a regular candlestick chart, but due to the difference of the candles' appearance, it is treated by traders more as an indicator than as another chart mode.

HA is intended to present trends and their reversal points more clearly.

For the purpose, HA filters out the market fluctuations (noises) by employing average values in calculation of its bar prices. In candlestick charts, each bar is formed by four prices of a period: Open, High, Low, and Close (OHLC bar), whereas, the Heikin-Ashi technique uses some averaged values of immediately preceding and current periods (the formulas are provided later in the article). As a result, many extreme values are leveled, and the chart looks smoother and crisper. Note that HeikinAshi Chart can be drawn both on the market price chat and in an additional area below it.

On the following pictures, you can see examples of a Heikin-Ashi indicator.

and a regular candlestick chart.

HA works well enough on its own but can be used in combination with the market price chart and other indicators.

Due to the fact that HA employs previous period's prices, its current period's prices are used with some delay. It results in HA's slight lagging behind the market prices.

To apply an HA chart, a trader needs to follow the procedure common to all Marketscope indicators. For more information, see the Add Indicator article.

During the procedure, a trader can customize an HA chart's appearance by specifying its parameters on the Parameters tab of the HA Properties dialog box. HA has only one parameter group - Appearance parameters. For more information, see the Change Indicator Properties article.

When an HA chart is drawn, a trader can analyze it and try to spot the following trading signals:

Bullish bars - is a succession of green ascending bars, almost all of which have big bodies with long upper shadows (lines above and below a bar's body) and no lower ones. It signals an uptrend and the need to consider closing of Sell positions and opening of Buy ones.

Bearish bars - is a succession of red descending bars, almost all of which have big bodies with long lower shadows and no upper ones. It signals a downtrend and the need to consider closing of Buy positions and opening of Sell ones.

Reversal bars - is an occurrence of so called Doji (bars having no or very small bodies and long upper and lower shadows). It signals a possible trend reversal and the need to open or close appropriate positions.

On the following picture, you can see examples of Heikin-Ashi trading signals.

The Heikin-Ashi chart values are calculated using the following formulas:

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

where:
Open_i - is the Open price value of the period being calculated.
Open_i-1 - is the Open price value of the period immediately preceding the current period.
Close_i-1 - is the Close price value of the period immediately preceding the current period.
High - is the High price value of the period being calculated.
Low - is the Low price value of the period being calculated.
Close - is the Close price value of the period being calculated.