May 4, 2021 | AtoZ Markets – Technical analysis is a study that analyzes and observes the price movement’s past, present, and possible future action. Technical traders and analysts use different types of charts to do this. We have three types of charts: line, bar, and candlestick charts. This article will tackle more on the second one, which is the bar chart.
The bar chart
A bar chart is a more complex type of chart if we compare it to a line chart which is pretty simple and straightforward. Traders and analysts use a line chart when they only need to see the bigger picture of the trade as it only shows the closing price of one trade to the next one. A bar chart offers more details as it shows the opening and closing prices together with the highs and lows. Using a bar chart, a trader can visualize a price range in a given time frame. Bar charts also show volatility.
The bar chart and the vertical lines
Bars have different sizes. They may increase or decrease in size. They may also be over another range of bars. If we will observe a bar chart, we will see a vertical bar (line) that expresses the trading range as a whole. The bottom part of this vertical bar represents the lowest traded price in that time frame. The highest part of the bar represents the highest traded price in that time frame. This bar grows more prominent as the price fluctuation becomes more volatile and becomes smaller as the price becomes more calm and steady. The bar’s height is a reflection of the range between the bar’s high and low in that given time frame.
The bar chart and the horizontal lines
A while ago, we mentioned that a line chart only shows the closing price of one trade to the next one. The bar chart also keeps a record of that given period’s opening and closing prices with horizontal lines attached. If we look at a bar chart, the horizontal has on the bar’s left part represents the opening price. On the other hand, the horizontal hash on the right portion represents the closing price.
Points to review
If you ever encounter the term bar, this means data that we see in charts. A bar is a time segment. It may be minutes, hours, days, weeks, etc. Bars are also known as OHLC charts. OHLC stands for a currency’s Open, High, Low, and Close. Let us cap it off with a little summary of today’s lesson:
- The open. It is the left horizontal has, and it represents the opening price.
- The close. The right horizontal hash represents the closing price.
- The high. The highest point of the vertical line represents the highest traded price of that time frame.
- The low. The bottom part of the vertical line represents the lowest traded price for that time frame.
- The vertical line. It represents the whole trading range.
The terms and their corresponding meanings are pretty easy to memorize and understand, right?