Bar and candlestick charts are used by technical analysts in the study of supply and demand for a security or commodity in a marketplace. They are sometimes used to represent other data sets as well, such as weather or medical information.

Bar charts employ the use of bars, which represents the trading range of a security or commodity for a given period. This period may be as short as a minute or as long as a year or decade depending on the time frame being analyzed. Bars have a small tick symbol on the left side to represent the opening price for the period and a small tick on the right side to indicate the closing price.

Candlestick charts employ the use of candles, which also represent the trading range of a security or commodity for a given period. Candles have bodies and shadows. Bodies are defined as the range between the opening and closing price for the day. Shadows represent the range for the day outside of the open/close prices.

Both types of charts are commonly used in conjunction with volume bars — often along the bottom of the chart. By observing the price of a commodity during high volume up or down periods, over many periods, technical analysts can deduce the presence of accumulation or distribution, or institutional buying or selling.

Both types of charts are often combined with other technical studies, such as moving averages, stochastics, moving average convergence divergence and Bollinger bands.

Bar charts are most commonly used charts by technical analysts. Popular technical analysis patterns that charts are studied for include O'Neil cup with handle, double bottom, head and shoulders and three weeks tight.

Candlesticks were developed in the 1800s and are reported to have been originally used by Japanese rice traders. Popular traditional candlestick patterns used by technical analysts include engulfing patterns, harami patterns and the evening star. Newer candlestick patterns are sometimes identified, such as the hikkake pattern that was named and utilized by Daniel L. Chesler.

  1. What do the different colored candlesticks mean?

    Candlestick charts have been used in Western trading for many years and are a very popular method of plotting the price action ... Read Answer >>
  2. How do I Implement a forex strategy when spotting a Morning Star pattern?

    Learn how to design a forex trading strategy to use for trading the morning star candlestick pattern, an indicator of a bullish ... Read Answer >>
  3. Are continuation patterns most useful when looking at Candlesticks?

    Learn the basics of using candlesticks to confirm continuation or reversal patterns and the vital role this plays in establishing ... Read Answer >>
  4. How do I implement a forex strategy when spotting a Star Pattern?

    Learn a simple forex trading strategy designed to take advantage of market reversal indications given by three star candlestick ... Read Answer >>
  5. How do I implement a forex strategy when spotting a Rising Three Methods Pattern?

    Learn how to implement a forex trading strategy designed to profit from a trend continuation signal given by the rising three ... Read Answer >>
Related Articles
  1. Trading

    Candlestick Charting: What Is It?

    Discover the components and basic patterns of this ancient technical analysis technique.
  2. Trading

    The 5 Most Powerful Candlestick Patterns

    Statistics show unusual accuracy for the buy and sell signals of certain candlestick patterns.
  3. Trading

    Western Line Vs. Candlestick Charting

    These methods both have their merits, but they may be strongest when combined.
  4. Trading

    Candlesticks Light The Way To Logical Trading

    Crowd psychology is the reason this technique works. Find out how to make it work for you.
  5. Trading

    What Your Trading Charts Aren't Telling You

    You may be missing some key statistics when following charts in the market.
  6. Trading

    Beginner's Guide To Stockcharts.com

    Stockcharts.com is one of the most relied-upon websites for technical traders and chartists. Learn how to navigate the charting tools.
  7. Trading

    Understanding the "Hanging Man": The Optimistic Candlestick Pattern

    A hanging man is a candlestick pattern that hints at the reversal of an uptrend. The candlestick is recognizable by a small box atop a long, narrow "shadow."
  1. Morning Star

    A bullish candlestick pattern that consists of three candles ...
  2. Bullish Abandoned Baby

    A type of candlestick pattern that is used by traders to signal ...
  3. Bearish Abandoned Baby

    A type of candlestick pattern that is used by traders to signal ...
  4. Technical Analysis of Stocks and Trends

    The academic study of historical chart patterns and trends of ...
  5. White Candlestick

    A point on a candle stick chart representing a day in which the ...
  6. Candlestick

    A chart that displays the high, low, opening and closing prices ...
Hot Definitions
  1. Time In Force

    Time in force is a special instruction used when placing a trade to indicate how long an order will remain active before ...
  2. Retirement Planning

    Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve ...
  3. Drawdown

    The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted ...
  4. Inverse Transaction

    A transaction that can cancel out a forward contract that has the same value date.
  5. Redemption

    The return of an investor's principal in a fixed income security, such as a preferred stock or bond; or the sale of units ...
  6. Solvency

    The ability of a company to meet its long-term financial obligations. Solvency is essential to staying in business, but a ...
Trading Center