What is a Bar
A bar is a graphical representation of the price movement of a financial instrument that contains the open, high, low and closing prices for a set period of time or a specified set of data. For example, if a trader is working with daily data, one bar represents the set of quotes for one day. In the case of a one-minute bar, it represents the price data for one minute.
BREAKING DOWN Bar
The bar charts that are the most commonly used are the open-high-low-close, or OHLC, and the candlestick bar.
An OHLC bar is constructed with one vertical line and two short horizontal lines. The vertical line, referred to as the bar, represents the range of the price data for the specified time period. It shows the price movements by graphing the highest and lowest prices over the given time period. The four price data points that make up the OHLC bar are represented as:
Open: Short horizontal line to the left of the bar
High: Top of the bar
Low: Bottom of the bar
Close: Short horizontal line to the right of the bar
The components of a candlestick bar are a vertically positioned rectangle referred to as the body of the bar and two vertical lines connected to the upper and lower sides of the rectangle referred to as shadows. The price information represented by the candlestick bar is basically the same as the OHLC bar, with a couple of additional elements. Both the high and the low prices are similarly represented by the highest point of the candlestick bar and the lowest point, respectively. The open and close, however, are represented in a slightly different manner. The body of the candlestick bar is displayed in two different colors depending on the price action of the bar.
Typically, a bar with a closing price higher than its opening price is referred to as an up bar, and in the case of a candlestick bar, the body is filled with a light color or no color. In this case, the opening price is represented by the bottom edge of the body, and the closing price is represented by the upper edge of the body. A down bar is when the closing price of the bar is lower than the opening price. In these cases, the body is filled with a darker color. Additionally, the opening price is represented by the upper edge of the body, and the closing price is represented by the lower edge of the body.
The timeframe used for a bar depends on what a trader is analyzing. For long-term investors who are analyzing a wider scope, daily, weekly or monthly bars are more appropriate. For short-term or intraday traders who trade fast-moving markets, 60-, 30-, 10- or even one-minute bars are a better option. Some traders prefer tick bars. These represent a specific number of trades as opposed to a specific time period. These types of bars allow for more flexibility for intraday trading of fast-moving markets.