How come when I enable Heikin-Ashi, the DATA itself changes?

It is my understanding that the Heikin-Ashi technique is designed to make candlesticks easier to read.

But when I change my chart over to Heikin-Ashi, the actual OHLC data changes. Why? Assume you're using 1 day candle charts. Doesn't a stock open at a given price on a given day? Why would changing the chart type change the actual opening price data?

For example:

I'm looking at a six month chart of YHOO, with 1 day candles.

Look at 4/18/07.

With Heikin-Ashi candles, it says:

O: 31.7178
H: 31.7178
L: 27.89
C: 28.38

With regular candles, it says:

O: 28.42
H: 28.90
L: 27.89
C: 28.31

Uh, ok. So what was the opening price on that day? 31.7178? Or 28.42?

Seems like such a substantial difference could cause massively different trading approaches. That's kinda scary.

Also, when I turn off Heikin-Ashi, a lot more candlestick patterns appear. There are a lot more hammers and shooting stars and such. With Heikin-Ashi turned on, it seems like it's mostly big filled candles or big empty candles.

So even tho they're desinged to make candlestick charts easier to follow, are they really designed to make it harder by masking patterns and making everything look much more trendy than it really is?

 

Here ya go!!!

http://www.investopedia.com/articles/technical/04/092204.asp

Schaefer

 

I use HA candles all the time but with the bid/ask activated.

 

So they actually use a different formula? So it's not really the O, H, L, or C then, is it?

 

What does that mean? I've been experimenting with HA recently, but by the time a signal is confirmed, the stock is at a much higher price than the HA indicates.

 

Correct, it is a formula. Here's an Ensign Software article explaining.

http://www.ensignsoftware.com/tips/tradingtips57.htm

 

The candle confirms the buy signal. Right now, I use the HA candle with the pv indicator for better odds that the trade will work.

 

Thanks. I don't like I like HA anymore because it's not actual data.

Ok, here are some examples.

Look at the 3 minute Heikin-Ashi candles from AMD today. Look at this nice trend. Easy to trade, right?



Man, I'll be a millionaire in no time. And there's not a gap to be found on the entire chart!

Oh wait, that's not what actually happened. The 3 min candles based on ACTUAL data look like this:




Here's RMBS from today with the Heikin-Ashi candle technique:



A bit choppy, but still some decent trends.

Now let's look at the real data:



That channel from about 13:15 to 16:00 is almost impossible to make out now. If you draw the channel lines on the Heikin-Ashi version and then switch it to regular candles, the prices are no longer contained within the channel. And holy gaps!

Thanks again for posting that article.