HeikinAshi is one of only a few chart or analysis systems that gives a trader diction and guides him when he already has a situation on his hands. That means when the trader is already in the middle of a trade. HeikinAshi (HA) charts are a variation of conventional Japanese Candlesticks. Both these charts are invented by the same person and originated from Japan. However, they are at their best in a different situation. Here, in this post, we will discuss how to calculate an HA chart to reach a profitable decision. Let’s get going.
Calculation Procedure for HeikinAshi Charts
To a beginner’s eyes, HeikinAshi sticks will look identical to the traditional Candlesticks. But basically, they have unique souls and features. Generally, they are compared with dogs and wolves for their resemblance. They look identical, but are different in many ways.
Before going in deep with the calculation of a HeikenAshi, traders need to differentiate between the two entities and their concepts. Traders need to tell both charts apart; otherwise, their capital may suffer tremendous recession and may eventually go blank.
With conventional Candlesticks, each of the sticks refers to the open, close, high, and low that the price creates at a given time. Since the opening and closing price plays an important role, you should be extremely while selecting the trading platform. Try to use the best trading platform in the ETF trading industry so that you can analyse the HeikenAshi chart without any problem.
With Heiken Ashi charts, every stick does not just show price action within a given period; it will also show price information from the previous session.
We know that it may sound a little complex right now. But we are about to straighten it out.
In the HA chart, the start and the end are differently calculated. Just like a normal Candlestick chart, each Heiken Ashi stick has a high, low, an open, and a close.
It means that like the traditional ones, HA candlesticks have four parts.
The opening point of a HA stick starts from the mid of the past stick. If someone looks closely at this chart, he will notice that each new candle begins from the mid of the previous one.
So, if the equation every opening of a new candle follows is,
Open = (Previous candle’s beginning price + Precious candle’s ending price)/2
The close of every HA stick equals the mean value of the four parts, open, close, the low, and the high.
Close = (Open + Close + High + Low) / 4.
The High of a HA candlestick reflects that period’s actual High. This might be the highest wick, or the close, or the open. Whichever parameter is the highest.
High = the maximum price acquired.
Similarly, the low of a HA chart resemblance a period’s actual low. It could be the lowest wick, the start, or the end. Whichever parameter is the lowest.
Low = the lowest price acquired.
The general concept behind the HA stick is that all of them make the price action smooth. The lion’s share of the market noise that is shown in the conventional Candlesticks has been minimized with the Heiken Ashi charts.
Summary of the HA Formula
Let’s have another look to clear out and memorize the formula used to calculate an HA chart.
HA sticks have four parts, and every one of them has a different way to express themselves.
- High = The maximum of the Open, Close, or High (whichever is the highest)
- High = The minimum of the Open, Close, or High (whichever is the lowest)
- Open = (Previous Bar’s Start + Previous Bar’s End) / 2
- Close = (High + Open + Low + Close) / 4
So, these are all the formulas and the ways to calculate Heiken Ashi graphs. Before you start using the Heiken Ashi chart, learn its proper use in the demo account. This will improve your decision-making capability.