What is a bar chart (technical-analysis context)?
– A bar chart is a time-series chart made of individual vertical “price bars.” Each bar summarizes how an asset’s price behaved during one selected interval (for example: 1 minute, 1 day, 1 week).
– Most bars display four values called OHLC: open (first traded price in the period), high (highest price), low (lowest price), and close (last traded price). Some charts omit the open and show only HLC.
Basic anatomy of one price bar
– Vertical line: runs from the low to the high for the period (total trading range).
– Left horizontal tick: marks the opening price.
– Right horizontal tick: marks the closing price.
– Color (optional): many platforms color a bar green/black when close > open and red when close < open so trends are visible at a glance.
Definitions (brief)
– OHLC: Open, High, Low, Close — the four price points commonly shown on each bar.
– Volatility: size of price movement; larger high–low ranges imply higher volatility.
– Trend: a sustained move higher (uptrend) or lower (downtrend) across multiple bars.
– Pullback: a temporary movement against the prevailing trend.
– Trend reversal: when price switches from up to down (or vice versa).
– Real body (candlestick term): the filled portion between open and close on a candlestick (for comparison below).
How bar charts are used
– Timeframe selection: choose the bar period to match your horizon. Intraday traders use short bars (seconds/minutes); longer-term investors use daily, weekly, or monthly bars.
– Price-action analysis: bars let traders gauge volatility, momentum, and where buying or selling pressure was concentrated during the period.
– Entry/exit context: OHLC structure helps identify support/resistance, breakouts, and exhaustion.
Interpreting a single bar (what to look for)
– Tall vertical line = large high–low range → high volatility that period.
– Short vertical line = narrow range → low volatility / indecision.
– Large distance between open and close = strong directional conviction that period.
– Close near the high = buyers dominated late in the period (more bullish than a close far below the high).
– Close near the low = sellers dominated late in the period (more bearish than a close near the high).
– Sequence matters: one bar is informative, but patterns across consecutive bars drive trading signals.
Worked numeric example
– Suppose a daily bar has: Open = 100, High = 110, Low = 95, Close = 108.
1. High–Low range = 110 − 95 = 15 points → relatively large intraday volatility.
2. Open–Close distance = 108 − 100 = 8 points → buyers pushed price up during the day.
3. Close relative to high: 110 − 108 = 2 points from the high → close near the period high, which suggests buying strength persisted into the close.
4. Interpretation: the day showed significant range but ended with bullish conviction; if prior bars were also rising, this bar reinforces the uptrend. If many prior bars were red and then this green bar appears with a large range, it could signal a short-term reversal attempt.
Bar charts vs. candlestick and line charts
– Bar vs. candlestick: both present OHLC. Candlesticks show the open–close difference with a filled (or hollow) “body” and wicks; bars use small ticks at left/right of a vertical line. Candlesticks are often easier to read visually because bodies emphasize open/close relationships.
– Line chart: typically plots only one price per period (often the close). Simpler but loses intra-period detail that bars provide.
– Common practice: traders choose the format they find easiest to interpret; the underlying numerical information can be the same.
Checklist: reading a bar chart for trading
1. Select a timeframe appropriate for your plan (day-trade vs. swing vs. buy-and-hold).
2. Scan recent bars for trend direction (more green/black bars vs. more red bars).
3. Note volatility: are bars getting longer or shorter?
4. Examine where closes lie relative to highs/lows within each bar.
5. Look for sequences: higher highs / higher lows (uptrend) or lower highs / lower lows (downtrend).
6. Combine with support/resistance and volume for confirmation (volume is not shown on the bar itself).
7. Use stop and position-sizing rules before taking a trade (risk management).
Which charts are commonly used in technical analysis?
– The three main chart types are bar charts, candlestick charts, and line charts. All are tools to observe price movements and help identify trend and turning points.
Practical tips
– Turn on color coding if your platform supports it — it speeds visual pattern recognition.
– Switch timeframes: patterns that look decisive on one timeframe may be noise on another.
– Never treat one bar in isolation; confirm signals with adjacent bars and other indicators.
Sources
– Investopedia — Bar Chart: https://www.investopedia.com/terms/b/barchart.asp
– U.S. Securities and Exchange Commission (Investor.gov) — Trading Basics/Charts: https://www.investor.gov/introduction-investing/basics/how-market-works
– CME Group — Learn About Charts and Timeframes: https://www.cmegroup.com/education/charts-and-technical-analysis.html
– TradingView — Chart basics and types: https://www.tradingview.com/chart/
Educational disclaimer
This explainer is for educational purposes only. It does not constitute personalized investment advice, recommendations, or an offer to buy or sell securities. Always perform your own research and consider consulting a licensed financial professional before making trading decisions.