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Definition of 'Heikin-Ashi'

Heikin-Ashi is a type of candlestick chart used in financial trading to help traders identify market trends and make trading decisions.

The Heikin-Ashi chart is derived from the Japanese candlestick chart and uses a modified formula to plot the candlesticks. The modified formula is designed to smooth out market fluctuations and create a more accurate representation of the overall trend.

In a Heikin-Ashi chart, each candlestick represents a specified period of time, such as a day or an hour. The opening and closing prices of each candlestick are calculated using a formula that takes into account the previous candlestick's prices. The resulting candlesticks are often color-coded to show the direction of the trend, with bullish candles (green or white) indicating a rising market and bearish candles (red or black) indicating a falling market.

Traders use Heikin-Ashi charts to help identify trends, as the smoothed candlestick patterns can be easier to read and interpret than traditional candlestick charts. They may also use Heikin-Ashi charts in conjunction with other technical analysis tools to confirm trends and identify potential entry and exit points for trades.

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