Heiken Ashi comes from the Japanese term 'Heikin Ashi', meaning average bar.
The Heiken Ashi indicator modifies how price values are displayed on a chart.
A Japanese candlestick represents four pieces of price data in visual form, including:
In Japanese, Heikin means “average” and Ashi means “pace” (EUDict.com). Taken together, Heikin-Ashi represents the average pace of prices.
Heikin-Ashi Candlesticks are not used like normal candlesticks. Dozens of bullish or bearish reversal patterns consisting of 1-3 candlesticks are not to be found.
Instead, these candlesticks can be used to identify trending periods, potential reversal points, and classic technical analysis patterns.
HAO = (Open of previous bar + Close of previous bar) / 2
HAC = (Open + High + Low + Close) / 4
HAH = Highest of High, Open, or Close
HAL = Lowest of Low, Open, or Close
Heikin Ashi charts smooth price activity by calculating average values. An HA chart calculates its own open (HAO), high (HAH), low (HAL), and close (HAC) using the actual open (O), high (H), low (L), and close (C) of the time frame (1 minute, 5 minute, 15 minute, etc.).