The golden mean

In the February 2004 issue. Journal "Technical analysis of stock and commodity contracts" published an article by Dan Wolf "Using technology Khaikin-Ashi. Too often, traders hear about a technology and think "Holy Holy Grail" was found and slow "jump on board", not wasting time and energy to how to analyze it. The purpose of this article is to try to thoroughly understand the advantages and disadvantages of visual representations, creating mathematics of this method.

Dan Wolf said that "Khaikin" in Japanese means "average" and "Our" means "bar". So it literally translates as "the average bar." In fact, the method uses the technique of averaging as follows:

• haClose = (open + maximum + minimum + close) / 4
• haOpen = (haOpen (previous bar) + haClose (previous bar)) / 2
• haHigh = max (maximum, haOpen)
• haLow = min (minimum, haOpen)
* Ha - abridged abbreviation "Khaikin, Our"

I made a small change in the formulas proposed by Wolf. In fact, they are equivalent, but my formula more correct.

haHigh and haLow Article formula Wolf looked like:
• haHigh = max (maximum, haOpen, haClose)
• haLow = min (minimum, haOpen, haClose)

It is mathematically impossible to haClose were higher than the maximum of the bar, or lower than the minimum bar. haClose is the mean value of opening, maximum, minimum, and the closure of the bar. Opening should be in the range of the maximum-minimum. The closure must also be in the range of the maximum-minimum. Minimum equal to or below the maximum. Therefore, haClose can never be higher than the maximum or lower than the minimum. Since haClose can never be higher than the maximum, maximum haHigh there is no need to check for haClose as a possible price that would establish haHigh. Choosing a higher value of the maximum and haOpen quite enough. The same reasoning applies to the choice of prices for a minimum haLow. Choosing a lower value between the minimum and haOpen quite enough. haLow should not be considered haClose, because haClose will never be lower than the minimum. Of course, not bring any harm to check haClose, but it is superfluous and unnecessary action. Now, let us continue our analysis.

haClose
Closing haClose is the average of the four price bars: the opening, maximum, minimum, and closure. This creates an interesting effect on the markets of developing a strong trend, which, in my opinion, is misleading when you read the schedule. I proillyustriruyu this effect the following example.


This shows the original bar in the upper half of the chart, and the method of "Our Khaikin," in the bottom half. Bars 1 to 4 to develop a strong upward trend, as bars 5 - 8 develop a strong downward trend. Now, let's compare these two images. Data points "Our Khaikin," also shown on initial initial schedule by using the little red dots, connected by solid red lines through the maxima and minima, and the dotted red lines through the closure. These points and lines will help in comparing what the method "Our Khaikin," that averaged initial data bars. In ascending haClose candle will always be lower than the actual closure, and in descending candle, haClose will always be higher than the actual closure. These two principles are illustrated by comparing the situation of the red dots to the closing of the closure of bars in the original image graphics. In fact, rising candle "Our Khaikin," will always have the upper shadow, while descending the candle will always have a lower shadow. This is one of the primary points, which, in my opinion, misleading.

Please note: ascending candle in the method of "Haykinashi" can have or not have a lower shadow. Descending candle in the method of "Our Khaikin," can have or not have the upper shadow.


Shadow on the top of the normal ascending candles implies that the pressure has forced sellers to retreat from the market peak. Thus, I believe that this is misleading, when you see the upper shadow on the candle in the method of "Our Khaikin," when no sales pressure is not present. The same applies to the downward plug. The lower shadow descending candles implies that market pressures forced the buyers to waive the minimum. It is also misleading to use the usual interpretation of the lower shadow, because the buyers are not any pressure there.

Mathematically haClose can never exceed the 75% range of the original bar. 75% would be achieved when the opening and closing occur at the maximum of the bar. In this case, haClose = (H + H + H + L) / 4.

A simple example: O = 4, H = 4, C = 4, L = 0, in this case haClose = 12 / 4 = 3, thus the maximum value haClose equal to 3 / 4 range, because the range was 4. Consequently, the amount of candles will be the top 25% of the initial range of the bar or more. The size of the lower shadow of candles will be down 25% from the initial range of the bar or more.

In the December issue of 2003. Yashuyi Yamanaka gives five rules of trading on the schedule "Khaikin-Our." His rule 2 is as follows - "Positive Candle in the upper shadow means a strong signal to buy," and "Negative candle in the bottom shadow is a strong signal to sell." Above we have proved that each rising candle method "Haykinashi" should have the upper shadow, and each downward candle method "Khaikin-Our" must have a lower shadow. Therefore, Rule 2 means that each candle method "Our Khaikin," gives a strong signal to buy or a strong signal to sell. It is obvious that this can not be, so we must conclude that the rule 2, as proposed by Yamanaka is illogical assertion.

haOpen
Formula haOpen can be simplified as the mid-body candles preceding bar-Our Khaikin. See the graphic illustration of this, where the blue line from the previous candles body dragged to the median point of the body candles. This midpoint is used as the opening of the next bar-Our Khaikin.


Price discovery haOpen may be outside the range of initial primary bar. Therefore, a range of bar-Khaikin Our "expanded to include opening price haOpen. This expansion is made by choosing a higher value between the maximum and the maximum value for haOpen haHigh, and a lower value between the minimum and minimum values for haOpen haLow. Dan Wolf describes the process as the removal of "noise from the normal schedule," and creating "a better picture of trends." I believe that this is misleading. Let's again look at an example. One of the misperceptions Graphics Haykinashi "due to a lack of GEPov. The initial schedule, we see 6 GEPov, and they all were "averaged" in such a way that vanished from the schedule. If you GEpy something mean, either as a sign of momentum, or as the price level, which ultimately must be filled, you will need to do without it when using the graph-Our Khaikin.


Another wrong perception Graphics Haykinashi "relates to the length of the bars. In our example, many of the bars "Our Khaikin," (ha) twice the length of the original bars. Bars (ha) will be imposed on the portion of the bar, located on the left side. As part of an example, where the growing upward trend, at least (ha) are lower than the initial minimum, giving the impression that the market for bargain prices in this period of time, which really was not. As an example, let's look at the third bar. Price range of the original bar was 40 points from 700 to 740. Bar (ha) implies that the third time period, trading took place in the range from 640 to 740, ie, range is 100 points. This is misleading. Visual representation does not make any difference between the part of the range, which is actually part and which is created artificially.

Another wrong perception is linked with a combination of fourth and fifth bar. The initial schedule, the two bars form a combination known as "turning a key pair." This essential information is lost in the chart "-Our Khaikin. In fact, the fifth bar of the graph "Our Khaikin," shows how a rising candle that is 100% contrary to what actually happened. It is also, in my opinion, misleading.

Conclusion
I suppose that, after reading all this, you concluded that I was not particularly impressed by "Haykinashi" and try to dissuade you from its use. In fact, it's not, it may be effective for many of you, and if so, it would be wonderful. I always say, use what works for you. Graphs "Khaikin-Our included in the graphics package" Ensign Windows ", because some users asked about this. But, I do not know if this will help anyone to trade more effectively. An experienced trader Ira Tunik recently stated, "there are those who constantly look for" holy grail "and think that every new approach or tool to use for this. Over the years I came to the conclusion that the most exotic and complicated newly techniques do not help someone's ability to sell or improve profitability. " Regardless of this, at least read and understood the features selected by me, you will be using the method of "Our Khaikin," being better informed about how he creates "secondary bars.

Forex Magazine
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