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(A) What Is Heikin Ashi
(A) What Is Heikin Ashi
Heikin Ashi?
You’re probably familiar with the three popular chart types: line chart, bar chart, and
the candlestick chart.
But there’s another type of chart that you should know about that uses a totally
different technique to display price action.
1
Umm nope. Let’s focus now. We’re NOT talking about beer here!
We’re talking about CHARTS! (Although the spelling does seem pretty close. 🤔)
The difference is the method used in how candlesticks are calculated and plotted on
a chart.
Traditional Japanese candlesticks are great at helping you find good entry points since
they display potential reversals (like a shooting star) or breakout (like a
bullish marubozu closing above a resistance level).
Applying the Heikin Ashi technique to a price chart can help you decide whether
to stay in the trade or get out.
Heikin Ashi charts make candlestick charts more readable for traders who want to
know when to stay in a trade and ride a strong trend and when to get out when the
trend weakens.
2
What is Heikin Ashi?
In Japanese, Heikin means “average” and Ashi means “pace”. So together, Heikin
Ashi means the “average pace of price”.
The Heikin Ashi technique was created hundreds of years ago by Munehisa Homma,
a rice merchant from Sakata, Japan, who is considered the father of the candlestick
chart.
Homma realized that by tracking the price action in the rice market, he could actually
“see” the psychological behavior of other market participants, and make use of it.
3
To the untrained eye, the chart looks like your typical Japanese candlestick chart.
Each Heiki Ashi candlestick has a body and an upper and/or lower shadow (or wick).
4
They’re the same right?
Nope.