Abstract: The advantage of the average K-line chart (Heikin-Ashi) is that it allows you to follow the trend. The average K-line chart can not only smooth the fluctuations of general K-lines, but also simplify the process of observing the chart. Its principle is to use the average price of the previous period to predict the opening price of the current period.

The average K-line chart (Heikin-Ashi) helps you keep up with the trend

The average K-line chart (Heikin-Ashi) can smooth out the fluctuations of general K-lines and provide a clearer picture. price movement. General K-line charts can help you observe real-time market sentiment, but we need more than that. Investors are very worried about misreading the market direction. Once they misjudge the signal, the consequences will be serious.

The defective K-line chart

The general K-line chart cannot provide 100% clear trading signals, and may even cause interference in strong trends. Sometimes, there is more "noise" in the K-line chart than the signal. Too much "noise" often makes the K-line chart misleading. Although candlestick charts can provide a more accurate entry point when other tools or technical analysis signal reversals, traders should also be wary of potentially misleading signals.

The average K-line chart (Heikin-Ashi) simplifies the process of analyzing charts

The average K-line chart also simplifies the process of observing charts. If we know enough about the K-line chart, we will know that it has hundreds of technical forms. In addition to spending energy to learn, these technical forms are sometimes not necessarily reliable. The "shooting star" reversal signal appears in the yellow area outlined in the chart above, but it can be observed that there is no trend reversal in the market outlook. Sometimes it is market noise, and sometimes it is an accurate reversal signal.

Advantages of the average K-line chart (Heikin-Ashi)

The average K-line chart is a visually processed K-line chart that can be used to filter short-term price fluctuations and obtain long-term trends; Sometimes it can also be used to replace or judge price technical patterns. It can be seen from the formula below that the average K-line chart uses the average price of the previous period as the basis for measurement to determine whether the overall trend continues and whether the current price is higher or lower than the previous average. It can reflect the price trend more clearly and intuitively. towards.

Opening price = (previous opening price + previous closing price) 2

Closing price = (current opening price + current closing price + current highest price + current lowest price) 4

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High price = highest value (high point, opening price, closing price)

Low price = lowest value (low point, opening price, closing price)

Since the average The principle of the K-line chart is to use the average price of the previous period to predict the opening price of the current period, so we can see a series of candles of the same color sending a clear trend signal.

The average K-line chart (Heikin-Ashi) provides a new perspective on trading

When using the average K-line chart, we do not need to pay attention to various technical forms, we only need to Focus on clearly strong trends; and keep moving your stops to better control risk. When the candle body starts to get shorter or the color starts to change, it can confirm a reversal or correction signal, indicating that the future trend is unclear, and we'd better close the position and leave the market.

The strength of the trend can be displayed through smooth K-line charts. If we use the average K-line chart, in the upward trend, all we see are white candles, which means that the upward trend is very strong; we can continue to be bullish until a black candle appears. In this trading management model, use flexible stop-loss points to close your position promptly before entering a range or trend reversal.

Summary

The average K-line chart (Heikin-Ashi) allows you to truly grasp the trend and filter out false reversal signals. The key to its function is to combine the current price fluctuations with Compare the previous period's prices. If you are not sure when the trend will end and when to close the position, you can use the average K-line chart.