Crypto glossary
Heikin Ashi
Heikin Ashi is a smoothed candlestick chart that averages price data to filter noise, making trends easier to see than on standard candles.
Heikin Ashi, Japanese for average bar, recalculates each candle. Its close is the average of the period's open, high, low and close; its open is the midpoint of the previous Heikin Ashi candle's body; and its high and low include those values. The result is a chart where candles change colour less often and trends appear as runs of same-coloured candles.
Traders read long series of green candles with no lower wicks as a strong uptrend and red candles with no upper wicks as a strong downtrend. Small bodies with wicks on both sides suggest the trend is weakening. Some crypto traders use Heikin Ashi on higher timeframes to stay in trends and avoid reacting to every intraday wick.
The smoothing has a price. Heikin Ashi candles do not show actual open and close prices, so they cannot be used to place exact orders, and they react later to reversals. Backtests run on Heikin Ashi data can produce misleadingly good results if the strategy assumes fills at those synthetic prices.
Example
On the daily Heikin Ashi chart, SOL prints twelve green candles in a row without lower wicks. A trend follower holds the position until the first red candle with an upper wick appears.