Bar Chart in technical analysis represents a symbol which is made up of OHLC (Open, High, Low, Close) data which are typically used to illustrate price movement of a financial instrument over a specified period of time.
Bar Charts are a way of displaying more information to analysts than line charts. In addition to the closing price, bar charts display at least two additional pieces of information:
- the highest price (High) at which stock/script traded during that period (in this example, weekly)
- and the lowest price (Low) at which the stock traded during that chart period (in this example, weekly. On some Bar Charts, the Opening Price (O) for the day is also displayed.
Example:
figure 1 – construction of bar chart | source – ELEARNMARKETS.COM
Below mentioned figure shows you a weekly timeframe chart of S&P500 Index plotted using TradingView platform:
Price is plotted on the vertical axis, and time is measured on the horizontal axis, just as with line charts. Each trading week is represented by one vertical line, known as Bar Chart. The length of the bar indicates the trading range for that entire week. The top of the bar records the highest price at which the security traded during that entire week and the bottom of the bar records the lowest price at which the security traded during the entire week.
Thus, a longer bar represents a larger trading range, and a shorter bar indicates a smaller trading range.
|| Pro Tip: A small tick mark on the right side of the bar indicates that week’s Closing Price and small tick mark on the left side of the bar denotes the week’s Opening Price as shown in Figure 1 and professional traders/investors give emphasis on Closing Price only as that is the price at which institutions decide whether to buy/hold/sell that security. ||
- (Note – Here in the above figure, we have applied a setting in TradingView to show Up Days Bars in Green color and Down Days Bars in Red Color which may be customised easily by user as per her/his own convenience.)