Concept
Heikin Ashi
Heikin Ashi is a candlestick variant where each candle is calculated from averages of the current and previous periods rather than from raw open, high, low and close. The result is a smoother sequence with fewer colour changes.
How it is calculated
How to read it
- Because HA open depends on the previous HA candle, each candle carries information from those before it. This is what produces the smoothing.
- Sequences of same-coloured candles appear more often than on a standard chart, since averaging suppresses single-period reversals.
- Small bodies with wicks on both sides indicate periods where the averaged values changed little.
Why the price shown is not the price
A stock opens at ₹412, trades between ₹396 and ₹416, and closes at ₹409. The Heikin Ashi close is (412 + 416 + 396 + 409) ÷ 4 = ₹408.25, and the HA open is the average of the previous HA candle’s open and close — say ₹410.60. The candle drawn spans ₹408.25 to ₹410.60. Neither figure is a price at which anything traded. If you place a stop by reading a level off that candle, you are reading a computed average, not a market level. The chart is legitimate and useful for seeing direction; it just is not showing you prices.
What it does not tell you
- The plotted open and close are calculated values. No trade occurred at the HA open, so it cannot be used as an execution level.
- The smoothing introduces lag. Colour changes arrive later than on a standard chart because averaging resists single-period moves.
- Gaps are hidden. Because HA open is derived from the previous candle rather than the actual open, an opening gap does not appear as one.
Frequently asked questions
What is Heikin Ashi?
A candlestick variant where each candle is computed from averages of current and previous period values, producing a smoother chart with fewer colour changes than standard candles.
Can I use Heikin Ashi prices for stop-loss levels?
The open and close plotted are calculated averages rather than traded prices, so a level read off them does not correspond to a market level. Many traders reference the standard chart for execution levels for this reason.
Does Heikin Ashi lag?
Yes. The averaging means colour changes and turns appear later than on a standard candlestick chart. The smoothness and the lag are the same property.
Does Heikin Ashi show gaps?
No. Because the HA open is derived from the previous candle rather than the actual opening price, an overnight gap is absorbed into the calculation and does not appear visually.
Related
- Chart Types: Line, Bar, Candlestick, Heikin Ashi and Renko — Concept
- Renko Charts — Concept
- How to Read a Candlestick — Concept
Educational use only
This page is educational material about how a technical tool is calculated and read. It is not investment advice, not a recommendation to buy or sell anything, and not a signal service. No indicator predicts future prices. CernoQuant is a trading journal and analytics platform, not a SEBI-registered investment adviser. Trading decisions and their outcomes are yours alone.
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