Bar Chart Basics

Bar Charting popularized itself when Line Charting did not provide enough depth and analyses into the buying and selling pressures of the market. Bar Charts allow the technical analysis to represent considerably more information on the chart itself – including mainly, the Open, High, Low and Close.

In bar charts, the horizontal or x-axis is represented by time and the vertical or y-axis typically can represent price changes, open interest, or indicator values. The following diagram represents the components of a bar seen on a bar chart and the respective meanings.

From the diagram above, the ‘ticks’ on the left and right hand sides refer to the opening and closing prices for the period. In the instance where the opening price is not available, some programs will omit the left hand opening side altogether or substitute the previous periods close.

The range of the bar in the diagram above shows the distance from the highest to lowest price. The greater the range, the larger the difference between buying and selling pressures which typically indicates the more swings or uncertainty throughout the period.

In the chart above a bar chart has been drawn with volume added. Typically Volume is also drawn with a moving average bar to provide a lagging view of changes in overall volume movement. It can also be drawn with open interest – which represents the number of open contracts at the end of the period of the bar. As previously stated, volume is always only a confirming indicator and should not be used as the primary decision making tool for executing a trade.