A bar chart is one of the most popular trading charts used by traders. Reading bar chart gives day traders the opportunity to access information to help them make decisions. Besides, this chart is relatively easy to read and interpret.
What Do the Bars Consist of?
This chart consists of the opening foot (a vertical line face left) and closing foot (a vertical line facing right). Each bar has an open, high, low, and close price occurring on every specific interval that has been set by the trader.
For instance, if a day traders want to look a 1-minute bar chart, then he or she will get a new bar in every minute. Each bar shows the open, high, low, and close price.
Traders can also choose intervals, other than time, like a particular number of transactions. If the bar shows transactions, then the bar is called a thick chart. Using this chart, a new bar will appear whenever a certain number of transaction occurs for the stocks or any asset being charted.
The bar charts also show the direction of price movement, upward or downward, accompanied by how far the price move during the bar. Using this bar chart, day traders can assess the price movement.
If day traders make a decision according to those price bars, then, he or she does price action trade.
How to Read a Bar Chart?
Traders usually call bar charts as OHLC bar charts or HLC charts. The name refers to the open (O), high (H), low (L), and close (C0.
Open
The open represents the first price traded during the bar. it indicates by the horizontal foot on the left of the bar.
High
The high represents the highest price traded during the bar. it indicates by the vertical bar’s top.
Low
The low represents the lowest price traded during the bar. It indicates the bottom line of the vertical bar.
Close
The close represents the last price traded during the bar. It indicates by the horizontal foot on the right of the bar.
The Price Direction
The location of the opening and closing price represents the price direction during the bar. When the closing foot is higher than the opening foot then the price moves upward. Conversely, if the closing foot is lower than the opening foot then the price moves downward.