Bar Chart

What Is a Bar Chart?

Bar charts comprise of various price bars, with each bar delineating how the price of an asset or security moved throughout a predefined time span. Each bar normally shows open, high, low, and closing (OHLC) prices, albeit this might be adjusted to show just the high, low, and close (HLC).

Understanding Bar Charts

A bar chart is an assortment of price bars, with each bar showing price movements for a given period. Each bar has a vertical line that shows the highest and lowest price came to during the period. The opening price is set apart by a small horizontal line on the left of the vertical line, and the closing price is set apart by a small horizontal line on the right of the vertical line.

On the off chance that the closing price is over the open price, the bar might be colored black or green. Alternately, assuming the close is below the open, the price dropped during that period, so it very well may be colored red. Variety coding the bars assists traders with seeing trends and price movements all the more obviously. Variety coding is accessible as an option in most charting platforms.

Technical analysts use bar charts — or other chart types, for example, candlestick or line charts — to monitor price action, which supports trading choices. Bar charts allow traders to examine trends, spot potential trend reversals, and monitor volatility and price movements.

Traders and investors conclude which period they need to dissect. A 1-minute bar chart, which shows another price bar every moment, would be helpful for a day trader yet not an investor. A week after week bar chart, which shows another bar for every seven day stretch of price movement, might be suitable for a long-term investor, yet not such a huge amount for an informal investor.

Deciphering Bar Charts

Since a bar chart shows the open, high, low, and closing prices for every period, there is a great deal of data that traders and investors can use.

Long vertical bars show there was a big price difference between the high and low of the period. That means volatility increased during that period. At the point when a bar has tiny vertical bars, it means there was little volatility.

On the off chance that there is a large distance between the open and close it means the price took a critical action. Assuming the close is far over the open, it shows purchasers were extremely active during the period, which might demonstrate really buying in ongoing periods is approaching. In the event that the close is extremely close to the open, it shows there was not much of conviction in the price movement during the period.

The location of the close relative to the high and low may likewise give significant data. Assuming an asset revitalized higher during the period however the close was well below the high, it flags that around the finish of the period venders came in. That is less bullish than if the asset closed close to its high for the period.

In the event that the bar chart is colored coded in light of whether the price rises or falls during the period, the tones can give data initially. An overall uptrend is ordinarily addressed by more green/black bars. Downtrends, then again, are commonly addressed by additional red bars.

Bar Charts versus Candlestick Charts

Bar charts are basically the same as Japanese candlestick charts. The two chart types show a similar data yet in various ways.

A bar chart is made out of a vertical line, with small horizontal lines on the left and right that show the open and close. Candlesticks likewise have a vertical line showing the high and low of the period (called a shadow or wick), however the difference between the open and close is addressed by a thicker portion called a real body. The body is concealed in or colored red assuming the close is below the open and concealed in or colored white or green in the event that the close is over the open. While the data is something very similar, the visual look of the two chart types is unique.

Bar Chart Example

The following picture is a bar chart for the SPDR S&P 500 (SPY) ETF. During declines, the bars regularly get longer, showing an increase in volatility. Declines are likewise set apart by more down (red) price bars compared to up (green) bars.

As the price ascends, there will quite often be more green bars than red bars. This serves to spot the trend visually. Even however there are regularly red and green bars during an uptrend (or downtrend), one is more prevailing. This is the way prices move.

At the cost to move higher inside an uptrend, the price bars should mirror that by moving higher too, on average. On the off chance that the price begins moving lower, on average, by making more red bars, then the price is moving into a pullback or a trend reversal.

Highlights

• The left and right horizontal lines on each price bar address the open and closing prices.
• A bar chart visually portrays the open, high, low, and close prices of an asset or security over a predetermined period of time.
• Bar charts can be colored coded where assuming the close is over the open it very well might be colored black or green, and in the event that the close is below the open the bar might be colored red.
• The vertical line on a price bar addresses the high and low prices for the period.