The Bar Chart

There are three main chart types that traders use to read markets, specifically to determine the movement of price and identify trends. The first chart type covered is the Bar Chart, a Western technique fundamental to price charting.

Structure of the Bar Chart

A bar chart is comprised of a vertical line that represents the price range of a specific time period. The duration of this time period depends on the chart setup, with the most popular periods being:

  • Hourly
  • Daily
  • Weekly
  • Monthly

Components of a Single Bar

The vertical line, together with the left and right ticks, is referred to as the bar. It captures the full range of price action:

  • Highest Point: Represents the high price of the financial asset during that period.
  • Lowest Point: Represents the low price of the financial asset during that period.
  • Price Range: The distance between the high and low points.
  • Tick to the Left: Represents the opening price.
  • Tick to the Right: Represents the closing price.

Relationships Between Consecutive Bars

Technical traders recognize specific relationships between two consecutive bars, which provide insight into market action and sentiment:

  1. Up Day: Usually means there are more buyers than sellers.
  2. Down Day: Implies more sellers than buyers.
  3. Inside Day: Implies a pause or consolidation in market action.
  4. Outside Day: Implies a high amount of activity and volatility in the market.

Detailed Summary

The text describes the Bar Chart, a foundational Western technique used by traders to analyze market price movements and identify trends. A single bar consists of a vertical line representing the price range (high to low) over a specific time period (e.g., hourly, daily). The bar also includes a left tick for the opening price and a right tick for the closing price. Furthermore, the relationships between consecutive bars—such as Up Day, Down Day, Inside Day, and Outside Day—offer insights into market sentiment, volatility, and consolidation.

Key Takeaways

  • The Bar Chart is one of three main chart types used by traders to read markets, determine price movement, and identify trends.
  • A bar chart uses a vertical line to represent the price range during a specific time period.
  • Common time periods for chart setup include Hourly, Daily, Weekly, and Monthly.
  • A single bar's components define the price action:
    • Highest Point: The high price of the asset during that period.
    • Lowest Point: The low price of the asset during that period.
    • Left Tick: Represents the opening price.
    • Right Tick: Represents the closing price.
  • Relationships between consecutive bars indicate market sentiment:
    • Up Day: Suggests more buyers than sellers.
    • Down Day: Suggests more sellers than buyers.
    • Inside Day: Indicates a pause or market consolidation.
    • Outside Day: Implies high market activity and volatility.