Heikin-Ashi chart

A Heikin-Ashi chart is a modified version of a candlestick chart that recalculates each candle using averaged price data rather than the raw open, high, low, and close, in order to smooth out short-term noise and make the underlying trend easier to see. The name comes from Japanese for average bar.

The formula is:

Because each candle's open and close are derived from an average that includes the prior candle, Heikin-Ashi charts tend to produce longer, cleaner strings of candles in the same color during a genuine trend, and shorter, choppier candles with small bodies and wicks on both sides during a sideways or indecisive market, which makes trends visually easier to spot than on a standard candlestick chart.

The tradeoff for that smoothness is that a Heikin-Ashi chart no longer shows the stock's actual traded prices for any given session, since each candle is a blend of averaged values rather than the true open, high, low, and close, which makes it unsuitable for tasks like placing an exact stop-loss order at a specific traded price. Traders typically use Heikin-Ashi charts alongside a standard candlestick or bar chart, relying on the smoothed version to judge overall trend direction while checking the standard chart for the actual prices at which the stock traded.