What Is a Bar?
A bar is the main component used for visually representing a single period of price action in bar charts. The bar is a vertical line with two small horizontal dashes which represent the open and closing prices. The vertical ends of the bar depict the high and low prices for the time period the bar represents. For example, if a trader is working with daily data, one bar represents the set of quotes (high, low, open, close) for one day. In the case of a one-minute bar, it represents the price data for one minute.
- Bar charts represent price changes using the four key prices in a time interval: the highest price, lowest price, beginning price (open) and last price (close).
- A bar can represent as little as one minute's worth of time or as long as a year.
- Bar charts used to be the most widely used charting type but candlestick charts have eclipsed them.
How a Bar Chart Works
A bar is constructed with one vertical line and two short horizontal lines. These provide for the depiction of the open, high, low and close prices (for OHLC bars). 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 bar charts that are the most commonly used include OHLC bars. In data captured before the advent of computer systems into the financial markets, HLC bars (omitting the opening price of the day) were also used. The bar chart was the most common form of price visualization in financial markets for about a century. Since the 1990s and the spread of computer-based charting systems, the candlestick chart has taken its place as the most common representation of price information.
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. A down bar is posted when the closing price of the time frame is lower than the opening price. The equivalent representation in candlestick charts is that 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.
Bar Time Frames
The time interval that a bar represents is variable based on what a chart reader selects on the charting program they use. Most charting programs allow for daily, weekly or monthly bars. For intraday time frames 60-, 30-, 10- or even one-minute bars are available to review.
Some traders prefer tick bars. These represent a specific number of price changes as opposed to a specific time period. These types of bars allow a trader or analyst to view data based on the quantity of activity, rather than by an actual time frame.