The Classic Type of Bar Chart in Trading
Bar charts are very popular in trading because each bar clearly displays four key indicators for any given period. Knowing these indicators gives traders a deep understanding of price action and allows them to identify market trends. They form the basis of cluster charts and volume spread analysis. Let’s look at the most popular type of bar chart, the OHLC chart.
Brief Bar Chart Description and Bar Charts Example
Bar charts are a sequence of vertical bars that display an asset’s price movement over a selected period. Each OHLC bar contains four key indicators:
- Open: the opening price of a given period, represented by the left horizontal tick.
- High: the maximum price for the period, indicated by the top of the bar.
- Low: the minimum price for the period, indicated by the bottom of the bar.
- Close: the closing price or the last trade of the period, determined by the right horizontal tick on bar charts.
Why Use a Bar Chart?
In addition to the four values mentioned above, bar charts allow traders to determine the following:
- Market volatility during a given period. The higher the bar on the graphs, the more the asset’s price has changed.
- Support and resistance zones. Bar charts will tell you where supply or demand for an asset is strong. You can determine optimal market entry/exit points. And if you use VPS hosting from MyForexVPS, you can execute orders with lightning speed.
- Volume spread. Bar charts show which price points have the highest trading volume. This will help you identify key supply and demand zones and make correct decisions about placing orders.
Bar charts have certain advantages over candlesticks. Since they are less visually cluttered, they are excellent for beginner traders. They will help you focus better on identifying support/resistance levels and quickly find the best moment to enter the market.
