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.