when the price rises over a period the right line will be above the left since the close is above the open often times these bars are colored either black or green if the price falls during a period the right line will be below the left since the close is below the open these bars are typically colored red 2
ohlc charts can be applied to any time frame 3 if applied to a 5 minute chart it will show the open high low and close price for each 5 minute period if applied to a daily chart it will show the open high low and close price for each day ohlc charts show more information than line charts which only show closing prices connected together into a continuous line ohlc and candlestick charts show the same amount of information but they show it in a slightly different way while ohlc charts show the open and close via left and right facing horizontal lines candlesticks show the open and close via a real body 2interpreting ohlc chartsthere are several different techniques that technical analysts use to interpret ohlc charts here are several guidelines vertical height the vertical height of an ohlc bar is indicative of the volatility during the period if the line height is great then traders know that there s a lot of volatility and indecision in the market 1horizontal line position the position of the left and right horizontal lines tell technical traders where the asset opened and closed relative to its high and low if the security rallied higher but the close was much lower than the high traders might assume that the rally fizzled toward the end of the period if the price fell but closed much higher than its low selling fizzled toward the end of the period if the open and close are close together it shows indecision since the price couldn t make much progress in either direction if the close is well above or below the open it shows that there was strong selling or buying during the period bar color typically during an uptrend more bars will be colored black than red during a downtrend more red bars than black bars are common this can provide information on the trend direction and its strength a series of large black bars at a glance shows strong upward movement while more analysis is necessary this information may be helpful when deciding whether to look further into the details patterns traders also watch for patterns to occur on the ohlc chart the major patterns include the key reversal inside bar and outside bar a key reversal in an uptrend occurs when the price opens above the prior bar s close makes a new high and then closes below the prior bar s low it shows a strong shift in momentum which could indicate a pullback is starting a key reversal in a downtrend occurs when the price opens below the prior bar s close makes a new low and then closes above the prior bar s high this indicates a strong shift to the upside warning of a potential rally example of an ohlc chartthe following is an ohlc chart for the s p 500 spdr etf spy overall rises are typically marked by a greater number of black bars like the period at the start of october trough mid november the price moves slightly higher but mostly sideways marked by more alternating bar colors in mid november the price starts to rise marked by a couple wider ranging black bars at the start of the year the price continued to escalate dominated by black rising bars at the start of february there are large red bars much larger than any seen during the prior advance this is a major warning sign of strong selling pressure 