Balancing On One Foot
The Heikin-Ashi technique is part of a larger family of charting techniques called candlesticks. These charts are simple bar graphs that contain information about the opening and closing prices of a certain stock over time. Not only can these charts tell you whether a stock is trending up or down, it can also give you clues about the stability of its value.
Instead of relying on societal or instinctual cues about the potential supply or demand of a certain security, technical analysts rely instead on clues from the past performance of the stocks themselves. A technical analyst will spend weeks and even months tracking the price points for a certain stock, looking for patterns that will indicate what it’s likely to do next.
Technical analysts use the Heikin-Ashi technique to identify chart trends more easily over time. Using this particular charting technique, hollow candles with no lower shadows depict strong uptrend movements in price, while solid candle bodies that lack a higher shadow indicate a strong downtrend for that particular stock. When used in combination with other charting and common sense techniques, the Heikin-Ashi provides a trader with all the information necessary make a solid trade decision.