Heikin Ashi Candles
Overview
Heikin Ashi (平均足) is a Japanese candlestick charting technique that uses modified price calculations to create each candle. Unlike traditional candlesticks that use actual open, high, low, and close prices, Heikin Ashi calculates these values using averages. This averaging process filters out market noise and creates a smoother visual representation that makes trend identification significantly easier.
The technique uses price information from two periods to smooth out volatility, resulting in more consecutive colored candles during trends. This helps traders avoid being misled by minor price fluctuations and false signals that are common in traditional candlestick charts, allowing them to focus on the overall trend direction and strength.
Interpretation & Trading Signals
Five Primary Signals:
- Strong Uptrend: Green/hollow candles with no lower shadows - let profits ride
- Uptrend: Green/hollow candles with small lower shadows - add to long positions
- Trend Change: Small body with upper and lower shadows (Doji) - potential reversal
- Downtrend: Red/filled candles with small upper shadows - add to short positions
- Strong Downtrend: Red/filled candles with no upper shadows - stay short
Key Patterns:
- Consecutive Green Candles: Strong bullish momentum, buyers in control
- Consecutive Red Candles: Strong bearish momentum, sellers dominate
- Color Change: Potential trend reversal - wait for confirmation
- Alternating Colors: Consolidation or sideways movement
Calculation Formulas:
- HA Open: (Previous HA Open + Previous HA Close) / 2
- HA Close: (Open + High + Low + Close) / 4
- HA High: Maximum of (High, HA Open, HA Close)
- HA Low: Minimum of (Low, HA Open, HA Close)
Example Usage
Code examples will be available once the Rust implementation is complete.