The Heiken-Ashi indicator looks like the candlestick chart, but it has some difference. Instead of the use of the standard OHLC values for candles, it uses another formulas:
Close = (Open+High+Low+Close)/4
Open = [Open (previous bar) + Close (previous bar)]/2
High = Max (High,Open,Close)
Low = Min (Low,Open, Close)
in other words, the indicator shows the “synthetic” candlesticks, which are different from the standard.
Image:
Heiken Ashi Indicator
The color of the Heiken-Ashi candlesticks depends on shadows.
The advantage of the Heiken-Ashi charts is a simple trend determination, the upward trend candles are blue,the downward trend candles are red.
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