Investing Trading Day Trading Heikin Ashi Chart Basics Heikin Ashi uses average price to smooth the chart By Adam Milton Adam Milton Adam Milton is a professional financial trader who specializes in writing and curating content about commodities markets and trading strategies. Through both his writing and his daily duties in trading, Adam helps retail investors understand day trading. As the principal DAX stock index trader for Patrick Marne Investment Management AG, Adam has been a full-time financial trader for several years, trading European, U.S., and Asian markets five days a week. 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At legal publisher Matthew Bender & Co./LexisNexis, he was a manager of R&D, programmer analyst, and senior copy editor. learn about our editorial policies In This Article View All In This Article The Heikin Ashi Calculation Advantages of Heikin Ashi Using the Heikin Ashi Charts The Bottom Line Heikin Ashi Chart versus Candlestick Chart. Photo: FreeStockCharts / Wikimedia Creative Commons Heikin Ashi (HA) is a type of trading chart created in Japan. It's similar to candlestick charts in that the color of the candlestick denotes the direction the price is moving. There's one main difference between traditional candlestick charts and Heikin Ashi charts. Heikin Ashi charts the average price moves, creating a smoother appearance. Because the Heikin Ashi price bars are averaged, they don't show the exact open and close prices for a particular time period. Some traders want additional confirmation of trend direction. HA charts are often used as a technical indicator on a typical candlestick chart. They can help highlight and clarify the current trend. Heikin Ashi charts sometimes are used on their own, especially by swing traders or investors. Day traders tend to use Heikin Ashi charts more as an indicator. That's because these charts have certain other benefits. Key Takeaways Heikin Ashi is a type of trading chart created in Japan. It plots smooth price activity by calculating average values.A main advantage is that Heikin Ashi charts are much "smoother" looking. It helps to more easily identify the trending direction.Heikin Ashi charts can be used in the same fashion as any other chart for finding chart patterns such as triangles and wedges, or trade setups. The Heikin Ashi Calculation Heikin Ashi charts smooth price activity by calculating average values. An HA chart calculates its own open (HAO), high (HAH), low (HAL), and close (HAC). It uses the actual open (O), high (H), low (L), and close (C) of the time frame (e.g., one minute, five minutes, 15 minutes). Calculation:HAO = (Open of previous bar + Close of previous bar) / 2HAC = (Open + High + Low + Close) / 4HAH = Highest of High, Open, or CloseHAL = Lowest of Low, Open, or Close A formula is used for calculating each price bar on a Heikin Ashi chart. Because of this, you don't know the exact price at which a given time period opened or closed. When day trading, this can be an issue, because knowing the exact price, especially when you're trading off a chart, is important. For longer-term traders, this is less of an issue; the open and close of a price bar is not as important in trades that last weeks, months, or years. Advantages of Heikin Ashi While Heikin Ashi won't show the exact price all the time, there are benefits to using these charts. The main advantage is that they look much "smoother," which helps to identify the trending direction more easily. Heikin Ashi Charts are also color-coded, like candlesticks. As long as the price is rising (based on the calculations), then the bars will show up as green (or another color of your choosing). As long as the price is falling (based on the calculation), then the bars will show up as red (or another color of your choosing). Candlestick charts may flip-flop constantly from a green bar to a red bar to a green bar, but Heikin Ashi charts tend to have longer stretches of green and red bars. This provides clearer highlighting and confirmation of current trends. Using the Heikin Ashi Charts Heikin Ashi charts can be used in the same fashion as any other chart, for finding chart patterns like triangles and wedges, or trade setups. Entry and exit points may vary slightly, compared to using a candlestick chart, since the price on an HA chart may be slightly different from what is on the candlestick chart. Test your strategies first to see whether they work well on Heikin Ashi charts before opting to use them when real money is on the line. The Bottom Line One chart type isn't necessarily better than another. Rather, some traders like Heikin Ashi charts because they help isolate the trend better and aren't as choppy to look at, while others like the additional detail and precise pricing of standard candlestick or bar charts. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Corporate Finance Institute. "Heikin-Ashi Technique."