OHLC and HLC Bar Charts
An OHLC Bar Chart
Bar charts are one of the most popular forms of stock charts and were the most widely used charts before the introduction of candlestick charts. Bar charts are drawn on a graph that plots time on the horizontal axis and price levels on the vertical axis. These charts provide much more information than line charts as they consists of a series of vertical bars that indicate various price data for each time-frame on the chart. This data can be either the open price, the high price, the low price and the close price, making it an OHLC bar chart, or the high price, the low price and the close price, making it an HLC bar chart. The height of each OHLC and HLC bar indicates the price range for that period with the high at the top of the bar and the low at the bottom of the bar. Each OHLC and HLC bar has a small horizontal tick to the right of the bar to indicate the close price for that period. An OHLC bar will also have a small horizontal tick to the left of the bar to indicate the open price for that period. The extra information is one of the reasons why the OHLC charts are more popular than HLC charts. In addition, some charting applications use colors to indicate bullish or bearishness of a bar in relation to the close of the previous bar. This makes the OHLC bar chart quite similar to the candlestick chart, except that the OHLC chart does not indicate bullishness or bearishness of the period of one bar as clearly as the candlestick chart (the color of an OHLC bar is always in relation to the close of the pervious bar rather than the open and close of the current bar).
An OHLC Bar
Most bar charts contain a lower pane that plots the total volume traded during a particular period. This part of the chart has a separate scale on the vertical axis to illustrate volume levels. It too consists of typical vertical bars.
The following two charts of the EUR/USD illustrate the differences between line and bar charts in terms of the amount of information each one parts. First is the line chart that only plots the close price of the underlining security and the second is the OHLC bar chart. Both charts have a 15-minute time frame and cover the exact same period.
A Line chart of the Euro/USD
A Bar chart of the Euro/USD
The OHCL bar chart also illustrates a few simple trend reversal patterns that consist of two to three bars. These include the key reversal, the inside bar, and the outside bar. In addition, bar charts can also trace complex chart patterns, such as the head and shoulders pattern, that recur on a reasonably regular basis.
Continuation patterns indicate that there is a greater probability of the continuation of a trend than a trend reversal.. These patterns are generally formed when the price action enters a consolidation phase during a pre-existing trend. During the consolidation phase, the trend appears to change; however, the continuation of the preceding trend is more probable.
Some of the common continuation patterns include the cup and handle pattern, flags and pennants, symmetrical triangles, ascending triangle and desc...
Double Top Pattern
Reversal patterns mark the turning point of an existing trend and are good indicators for taking profit or reversing your position. Generally, trend reversal patterns indicate that a support level in a downtrend or a resistance level in an uptrend will hold and that the pre-existing trend will start to reverse. These patterns allow you to enter early in the establishment of the new trend and are usually result in very profitable trades.
The common reversal patterns include the double tops and double bottoms, triple tops and triple bottoms, broadening tops and broadening bottoms, ...
Line charts are the simplest types of stock charts and were favored by Charles Dow, who is widely considered as the father of technical analysis. Charles Dow felt that the closing price of a stock was the most important price to consider in analysis as it determined each period's unrealized profit or loss. Dow felt that plotting the highs and lows of the period obscure the real value of the stock, which, he argued, is determined solely by the period's close price.
Line charts are popular with traders who rely more on chart patterns for trading signals as ...
Candlestick charts have become popular in the West since the 1980s but they date back from the 1700s. The evolution of candlestick charts are generally attributed to the trading principles of a Japanese rice trader named Munehisa Homma who traded rice in 18th century Japan.
In candlestick charts plot the open price and the close price for the period to form the solid body of the candlestick. The high price and the low price are plotted as the upper and lower shadow, respectively. In this respect, they display the same information as OHLC bar ...