Heikin Ashi

Each Heikin Ashi candle is derived from two things: the current interval's open, high, low and close, and the previous Heikin Ashi candle. The close is the average of the interval's four prices. The open is the midpoint of the previous Heikin Ashi candle's own open and close. The high and the low are then the extremes of the interval's high or low and those two averaged values, which keeps the candle enclosing its own body. The name is Japanese for average bar.

Because every candle inherits from the one before it, small counter-moves are absorbed into the average and the chart resolves into long runs of a single colour, with an indecisive candle appearing where a standard candlestick chart shows a cluster of alternating ones. That is a smoothing operation with the properties of a moving average, including its lag: a colour change on the smoothed series arrives later than the price event that caused it, and the convention that reads a change of colour with a short body as the earliest indication of a turn inherits that delay.

The consequential point is that none of the four values printed by a Heikin Ashi candle is a price that traded. The open in particular is an average of two earlier numbers, so it names a level at which nothing was ever dealt, and a level read off this chart is not a level at which an order could have filled. Anything measured against a real fill, the distance to a stop, the size of a gap, the cost of crossing the spread, has to be read from the standard candles the smoothing was applied to.