Free lesson · Technical analysis

Heikin-Ashi: smoothed candles are synthetic prices

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• Compute the synthetic close from the current real OHLC average. Compute the synthetic open from the preceding Heikin-Ashi open and close.
• Seed the first synthetic open explicitly; this lesson uses the first real open/close midpoint.
• The synthetic high/low enclose both synthetic open/close and the real extremes.
• Repeated same-color synthetic candles may describe persistence in the smoothing rule. Test a trend filter against simpler moving averages.
• Use Heikin-Ashi only for features or visualization; reconcile orders and fills with real executable prices.
• Never backtest fills at synthetic opens, closes or intermediate prices merely because the chart displays them.

Use the rule

• Fix the definition, units and information timestamp.
• Compute the example and inspect the graph.
• Compare with a simple baseline on untouched periods after costs.

Before moving on

Write the exact rule, its availability time, an invalidation condition and a fair out-of-sample test.

• Research context: review the related evidence checkpoint. The numerical convention here defines a candidate feature; that related research does not validate this exact rule.

def heikin_ashi(bars):
    result=[]
    for o,h,l,c in bars:
        if not l<=min(o,c)<=max(o,c)<=h: raise ValueError("Invalid OHLC")
        close=(o+h+l+c)/4
        opening=(result[-1][0]+result[-1][3])/2 if result else (o+c)/2
        result.append((opening,max(h,opening,close),min(l,opening,close),close))
    return result

print(heikin_ashi([(100,106,98,104)]))