A bar chart is a graph used for data visualization and technical analysis in finance. It consists of vertical and horizontal lines arranged on a graph to give useful information.
In financial markets, bar charts are used for technical analysis, where the bars are used to interpret the market and get accurate readings. It is also known as OHLC charts as they represent the market's opening, closing, high and low prices at any time.
A bar graph comprises multiple bars representing the market flow at a specified time. Bars have a maximum and minimum point, with two ticks representing certain market trends. The upper tick closer to the market high shows the market's opening rate, and the lower tick closer to the market low is for the closing price.
To analyze a bar chart, you ought to observe and study markers used to conduct the technical analysis of the market.
A spike is experienced in the market when there is a variety of selling and buying prices on the unit time resulting from sentiment.
When the vertical bars are long, it shows that the high and low of the market were far apart. This indicates that the asset’s value changed by a huge factor during the unit time. Similarly, if the length of the bar is small or short, it indicates that the asset’s price did not experience much change. This effect is known as the volatility level of the market.
The length of the bar is of key importance while analyzing the bar chart. Short bars are used as an indicator of indecisive market sentiment. Where the investors do not show enthusiasm. Such an environment is referred to as an inside day where the current high is lower than the previous day, but the previous low is higher.
The price gap is the difference between the previous high and the current day’s low.
An upside gap is seen when:
Daily Low-High of the Previous Day
A downside gap is seen when:
Daily High-Low of the Previous Day
Bar Charts are essential for traders to determine market trends and make relevant assumptions and decisions. Moreover, they help with future predictions and summarize the bulk of information into an easily readable format.
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