Bitcoin Heikin Ashi

How are the candles smoothed?

The close averages that period’s open, high, low and close. The open averages the previous smoothed open and close. The high and low are the period’s own, widened to take in the smoothed open and close.

What does the color mean?

Orange means the smoothed close is at or above the smoothed open. Blue means it is lower.

Which periods are included?

Weekly candles use complete weeks, Monday to Sunday, and monthly candles complete calendar months. A week or month the record only partly covers, at either end, is left out, and the smoothing runs over the whole record before any date range is picked.

Can a long run keep going?

The comparisons describe past runs. They do not set a time limit for the current one.

Why smooth the candles at all?

A normal candle chart shows every twitch. One strong day inside a falling week draws a candle that points the other way, and a week of small moves in the same direction looks like a scatter of unrelated bars. That noise is real, but it is not the trend, and it is very hard to look past.

What does Heikin Ashi mean?

Heikin Ashi means average bar in Japanese, and that is exactly what it does. Each bar is blended with the one before it: the close becomes the average of that period's open, high, low and close, and the open becomes the midpoint of the previous bar's own open and close. Everything else about the chart is unchanged.

How do traders read it?

The effect is that a trend shows up as a run of same-colored bars with small or missing wicks on one side, and a turn shows up as the run breaking. Traders use the length of the current run, and how it compares with past runs, rather than reading any single bar.

What is the smoothing hiding?

Quite a lot, on purpose. A Heikin Ashi open and close are computed averages, not prices anything traded at, so no entry or exit can be read off them. The candles also lag: each carries the one before it, so a real turn takes a period or two to show up as the run breaking. That delay is the price of the calm, and it is why this chart is better at telling you a trend is intact than at telling you it just ended.

What does this mean for you?

The current run on the daily candles has lasted longer than 376 of the 675 finished falling runs. That is context, not a countdown: runs do not end because they have gone on a while, and the longest one on this chart ran 23 days. Use it the way it is built to be used: to stop reading a single loud day as a change of direction. For the prices this smoothing stands in front of, see the plain candles, the whole history at its widest zoom, the trend signals and how fearful or greedy the market is.