Bar charts are one of the most popular graphical charts (the other being candlestick charts). Understanding how to read a single bar within a bar chart is essential to understanding how the bars within a bar chart interact with each other, to provide a complete picture of the underlying market.
Reading a Single Bar
Bar charts consist of many individual bars, with each bar representing the trading information for the chart time frame. For example, in a five minute bar chart, each bar represents five minutes of trading information.
The trading information that is shown includes the opening price of the bar (or time frame), the high and low prices of the bar, the closing (or last) price of the bar, the direction of the bar, and the range of the bar. All of this information is shown graphically (i.e. without needing to be calculated), so the information is available visually almost instantly.
Opening Price
The opening price of the bar is shown by a short horizontal line on the left hand side of the bar. This is the first price that was traded during the time frame represented by the bar. The opening price is sometimes colored differently from the rest of the bar, and in the example chart, the opening price is shown by the short red horizontal line.
Closing Price
The closing price of the bar is shown by a short horizontal line on the right hand side of the bar. This is the last price that was traded during the time frame represented by the bar. The closing price is sometimes colored differently from the rest of the bar, and in the example chart, the closing price is shown by the short green horizontal line.
High and Low Prices
The high and low prices of the bar are shown by the top and bottom of the long vertical line (i.e. the bar itself). The high price is the highest price that was traded during the time frame represented by the bar, and the low price is the lowest price that was traded during the same time frame. In the example chart, the high and low prices are shown by the yellow vertical line.
Direction of the Bar
The direction of the bar is shown by the relationship between the opening and closing prices of the bar, or graphically by the locations of the two short horizontal lines. The direction represents whether the price moved up or down during the time frame represented by the bar. If the closing price's horizontal line is higher than the opening price's horizontal line, then the bar is an upward bar. Conversely, if the closing price's horizontal line is lower than the opening price's horizontal line, then the bar is a downward bar. The bar shown in the example chart, is an upward bar (i.e. the price moved up during this bar) because the green horizontal line is higher than the red horizontal line.
Range of the Bar
The range of the bar is shown by the length of the vertical line (the bar). The range of the bar represents the volatility of the price during the time frame represented by the bar. If the vertical line is shorter than the previous bars, then the range has decreased (i.e. the volatility has decreased). If the vertical line is longer than the previous bars, then the range has increased (i.e. the volatility has increased). The range of the bar is the same as the high price of the bar minus the low price of the bar.
