Facing difficulties in reading the technical charts? Here’s a smoother version to help you out!
‘Heiken-Ashi’ means ‘average bar’ in Japanese. This technique is used to spot the trend and momentum in any security.
Investors often find technical charts and technical analyses difficult to understand. A technical chart is a basic aspect of analysing swing trades as well as intraday setup. However, the mixture of red and green candles on the trading terminal screen is often quite confusing for investors/traders. So in this article, we shall help beginners to simplify the technical chart, which would make it easier to interpret any security.
Apart from the candlestick chart, there is a better version of the technical chart called Heiken-Ashi chart. In simpler language, ‘Heiken-Ashi’ means ‘average bar’ in Japanese. Heiken-Ashi candlestick is very much similar to the normal candlestick, with a slight change in formulation.
- Close= (open + high + low + close)/4
- Open = (open of previous bar + close of previous bar)/2
- High = Max (high, open, close)
- Low = Min (low, open, close)
These four factors form a Heiken-Ashi candle. Interestingly, this technique is used to spot the trend and momentum in any security. It’s useful for making candlestick charts more readable and simpler to analyse. Let’s understand this through the chart itself.
Here’s the daily candlestick chart of SRF wherein, you can see that from May to August, the technical chart shows indecisiveness as long red and green candles were formed, making it difficult to understand the short-term trend. However, if you put the chart in Heiken-Ashi mode from the chart bar, you would notice a clear difference.
In this chart, a clear short-term trend is being seen. Basically, what Heiken-Ashi chart does is that it clear the unwanted disturbance or noise that lies in the candlestick chart. It forms a series of bullish candles, which indicates a clear uptrend while a series of bearish candles show a downtrend. Swing traders and intraday players often use this setup to get trend formations for their trades.
Now, put your technical chart on Heiken Ashi mode and keep track of SRF to see how the chart is developed!
Hope this article helps you to understand the important technical concept of Heiken-Ashi candle!