Bar Chart Basics for Traders
A bar chart is a stock chart type that is used for displaying price. When it is displayed in black, the price bars used today look a lot like the price charts from the business section of the newspaper. The following information goes over the structure of a price bar and different kinds of bar charts.
Price bar components
A price bar has four main components:
- Open price: The price at which the stock opens (shown on the left)
- High price: The highest price of the day
- Low price: The lowest price of the day
- Close price: The price at which the stock closed for the day (shown on the right)
These four components make up a price bar and the name is abbreviated to a chart style of OHLC Bar (OHLC is an acronym for open-high-low-close).
Different types of bar charts
When placed day after day, price bars form a picture but do not have the pronounced look of candlesticks. You can see the four components of an OHLC bar chart.
Because the individual price bars look the same, your attention is not drawn to them, unlike the big down candles found on the candlestick chart type. In the Tesla example, your eye tends to see the trend more than the individual bars.
Another type of bar chart, which is less common, ignores the open on each bar and just uses the high-low-close (HLC) information. In the construction of the price bar, it places a line across the bar rather than just on the right-hand side.
The price bar represents the price movement and the closing price without the opening price information. You can see an example of this type of chart here.
As print clarity has improved, the OHLC chart is more popular than the HLC chart. Many traders use the OHLC chart because the additional information of opening price valuable for understanding the daily price action.