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.