What are Bar Charts?
They are stock charts used in charting and study of chart patterns in technical analysis of stocks. They are also called as OHLC charts or Open-High-Low-Close charts. Each bar is a symbol created by connecting a series of above said price points. They are typically used to illustrate movements in the price of a financial instrument for a time period.
The time period may be in minutes of 5, 10, 15, 30, 60 etc; then we call it as 5 minute bar, 10 minute bar, etc; It may represent one full trading session of the day which we call as a day bar. It may represent a longer trading period like a week or a month or a year. Then it is called as a weekly bar, a monthly bar or a yearly bar respectively.
In olden times charts were drawn by hand by the trader. They were updating mostly day and weekly charts. Now with the computer we create any time frame charts just by a few clicks, in a few seconds.
This is the most commonly used chart.
To draw a bar chart, OHLC that is 'open, high, low and close', stock data is used. Hence the name OHLC chart.
A vertical line is drawn from high price point to low price point. A tick mark is placed on left of the line, attached to it, corresponding to the opening price, i.e. starting price (first price) for that time period.
Similarly a tick mark is placed on right of the line, attached to it, corresponding to the closing price (last price) for that time period.
These bars may be given different colors depending on whether prices rose or fell in that period. For example blue or green color for an up bar and red or orange for a down bar.
If the high and low of a bar is higher than previous bar, then that bar is called an 'up bar' or an 'up day'. If the high and low of a bar is lower than previous bar, then that bar is called an 'down bar' or an 'down day'.
Some chartists call a bar with close higher than the open as an up bar or an up day and a bar with close lower than open as a down bar or a down day.
If the high of present bar is higher than previous bar and the low present bar is lower than previous bar, then present bar is termed as an 'outside day'.
If the high of present bar is lower than previous bar high and the low of the present bar is higher than the low of the previous bar, then the present bar is termed as an 'inside day'.
Study the bar chart given below and compare it with any other type of chart.
Three Line Break Charts originates from Japan and gets its name from the default number of line blocks typically used. They use an up block (line), a down block (line) and a reversal block (line). These charts disregards the time factor, which is usually plotted on the X axis, in commonly used stock charts.