OHLC Chart

What is an OHLC Chart?

An OHLC chart is a type of bar chart that shows open, high, low, and closing prices for every period. OHLC charts are valuable since they show the four major data points over a period, with the closing price being considered the main by numerous traders.

The chart type is helpful on the grounds that it can show expanding or decreasing momentum. When the open and close are far separated it shows strong momentum, and when the open and close are close together it shows uncertainty or weak momentum. The high and low show the full price scope of the period, helpful in evaluating volatility. There several examples traders watch for on OHLC charts.

Grasping OHLC Charts

OHLC charts comprise of a vertical line and two short horizontal lines reaching out to the left and right of the horizontal line. The horizontal line stretching out to the left addresses the initial price for the period, while the horizontal line reaching out to the right addresses the closing price for the period. The level of the vertical line addresses the intraday range for the period, with the high being the period's high and the low of the vertical line being the period's low. The whole structure is called a price bar.

At the point when the price rises over a period, the right line will be over the left, since the close is over the open. Frequently, these bars are colored black. On the off chance that the price falls during a period, the right line will be below the left, since the close is below the open. These bars are regularly colored red.

OHLC charts can be applied to any time span. Whenever applied to a 5-minute chart it will show the open, high, low, and close price for every 5-minute period. Whenever applied to a daily chart, it will show the open, high, low, and close price for every day.

OHLC charts show more data than line charts which just show closing prices associated together into a continuous line. OHLC and candlestick charts show a similar amount of data, however they show it in a marginally unique manner. While OHLC charts show the open and close through left and right facing horizontal lines, candlesticks show the open and close by means of a real body.

Deciphering OHLC Charts

There are several unique strategies that technical analysts use to decipher OHLC charts. The following are several guidelines.

Vertical Height: The vertical level of an OHLC bar is indicative of the volatility during the period. In the event that the line level is great, traders know that there's a ton of volatility and uncertainty in the market.

Horizontal Line Position: The position of the left and right horizontal lines let technical traders know where the asset opened and closed relative to its high and low. On the off chance that the security rallied higher, yet the close was a lot of lower than the high, traders could expect that the rally failed around the finish of the period. Assuming the price fell, yet closed a lot higher than its low, selling failed around the finish of the period.

In the event that the open and close are close together, it shows uncertainty, since the price couldn't gain a lot of headway in one or the other bearing. Assuming the close is well above or below the open, it shows that there was strong selling or buying during the period.

Bar Color: Typically during an uptrend, a larger number of bars will be colored black than red. During a downtrend, more red bars than black bars are common. This can give data on the trend bearing and its strength. A series of large black bars, initially, shows strong vertical movement. While more analysis is essential, this data might be useful while choosing whether to look further into the subtleties.

Patterns: Traders likewise watch for examples to happen on the OHLC chart. The major examples incorporate the key reversal, inside bar, and outside bar. A key reversal in an uptrend happens when the price opens over the prior bar's close, makes another high, and afterward closes below the prior bar's low. It shows a strong shift in momentum which could demonstrate a pullback is starting. A key reversal in a downtrend happens when the price opens below the prior bar's close, makes a new low, and afterward closes over the prior bar's high. This shows a strong shift to the upside, warning of an expected rally.

Illustration of an OHLC Chart

The following is an OHLC chart for the S&P 500 SPDR ETF (SPY). Overall rises are regularly set apart by a greater number of black bars, similar to the period toward the beginning of October. Trough mid-November the price moves marginally higher yet generally sideways, set apart by seriously exchanging bar tones.

In mid-November, the price begins to rise, set apart by a couple more extensive going black bars. Toward the beginning of the year, the price kept on heightening, overwhelmed by black rising bars. Toward the beginning of February, there are large red bars, a lot larger than any seen during the prior advance. This is a major warning indication of strong selling pressure.

Highlights

• It tends to be applied to any time span.
• The vertical line addresses the high and low for the period, while the line to the passed on marks the open price and the line to the right denotes the closing price. This whole structure is called a bar.
• At the point when the close is over the open, the bar is many times colored black. At the point when the close is below the open the bar is much of the time colored red.
• An OHLC chart shows the open, high, low, and close price for a given period.