How Do You Calculate Heikin Ashi Candlesticks?
Let’s walk through how Heikin Ashi candles are calculated and how they differ from regular candlesticks.
As we mentioned earlier, to the untrained eye, Heikin Ashi might look like a standard Japanese candlestick chart—but it’s not.
It’s like trying to tell the difference between a Husky and a wolf.
Husky or Wolf?
Looks fluffy and friendly, right? You might think it’s safe to pet…
But is it a sweet doggo—or a wild predator?
You’d better be able to tell before you end up with a nasty surprise (and possibly become dinner for the whole wolf pack). 🐺
It’s the same with Heikin Ashi and traditional candlestick charts.
If you don’t know which one you’re looking at, your trading account could end up just like that poor soul who tried to pet the wrong “dog.”
So, what’s the big difference?
On a traditional Japanese candlestick chart, each candle represents the actual open, high, low, and close (OHLC) for the specific time period.
But with Heikin Ashi, each candle is smoothed out and partially based on previous price data, which makes trends easier to spot and market noise less distracting.
Let’s break down the Heikin Ashi formula step by step:
Here’s an example chart of GBP/JPY using Heikin Ashi candles:
(Insert Heikin Ashi chart here)
At first glance, it looks like a typical candlestick chart—but behind the scenes, the numbers are calculated differently.
Each Heikin Ashi candle still has four components: Open, Close, High, and Low—but here’s how they’re computed:
🔸 1. Open
The open of the current Heikin Ashi candle is the midpoint of the previous candle’s open and close:
Open = (Previous Open + Previous Close) / 2
Look closely, and you’ll notice that each candle starts roughly from the middle of the previous one, not at its closing price.
🔸 2. Close
The close is the average of the open, high, low, and close of the current period:
Close = (Open + High + Low + Close) / 4
This averaging smooths out wild price swings and makes trends more visually clear.
🔸 3. High
The high of the candle is simply the highest value among the current period’s:
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High
-
Open
-
Close
High = Max(Open, High, Close)
🔸 4. Low
The low is the lowest value among the current period’s:
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Low
-
Open
-
Close
Low = Min(Open, Low, Close)
🎯 Why use Heikin Ashi?
Heikin Ashi is all about smoothing out the chart to make it easier to identify the overall direction of the market.
It filters out a lot of the short-term fluctuations (a.k.a. "market noise") that can make traditional candlestick charts harder to interpret.
📌 Summary: Heikin Ashi Formula
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Open = (Previous Open + Previous Close) / 2
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Close = (Open + High + Low + Close) / 4
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High = Max(Open, High, Close)
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Low = Min(Open, Low, Close)
By understanding this formula, you'll be better equipped to use Heikin Ashi charts to spot trends, avoid false signals, and stay calm in the chaos of the markets.
Up next: let’s explore how traders actually use Heikin Ashi in their strategies!