Candlestick Chart Averaging

Discussion in 'Technical Analysis' started by dunitlongpole, Apr 2, 2006.

  1. Hello.
    I just read this article about removing noise on candlestick charts to help find trends easier on investopedia:

    I am interested in the "averaging" technique they mentioned in the first part of the article. Does anybody know the procedure for constructing these charts? They say "that is, where the current candle factors in the average of prior candles in order to create a smoother trend". How do you do that?

    Any help is appreciated.
  2. Instead of using candlestick or bar charting, why not just use a line chart instead for maximum "smoothness"?
  3. what are you trading?

  4. Looking at the chart it appears to be a technique similar to Heikin-Ashi, which is explained (with links) further down the page. Of course you can type "Heikin-Ashi" into a search engine to find out more.

    The problem with most noise-removal techniques is that the act of smoothing introduces lag in like degree. Averaging involves summation, which 'weighs down' the result with past data, hence the lag. In the context of devising a profitable system of entries and exits, averaging is about trying to reach some kind of worthwhile compromise between smoothness and lag.

  5. ============

    1[Me too.

    2]Excellant principal ,smoothing trends ;
    exactly what moving averages do, like that much/much better;
    than thier monkeying with price action. Each to his own.

    3]Wisdom is profitable to direct;
    & probably should mention have used most every [not all] chart under thre sun, that sounds like a unique marketing program, more than a practical trading idea, frankly.

    Good pricipal however, smoothing trends.