Understanding the OHLC Chart
The OHLC chart is a type of bar chart used to show open, high, low and closing prices.
The OHLC chart is of bar chart form and plays well in displaying 4 important data sets over a given period, which are the open, high, low and the close. The OHLC is made up of one vertical and two horizontal lines. The vertical line will vary in size depending the range of the period, with the top end representing the highest price and the lower end the lowest price of a given period. The two horizontal lines will be short in size and will extend to either end of the vertical line. The horizontal line extending left of the vertical line represents the open of the period. Whilst the horizontal line extending right of the vertical line will represent the close of the period.
A graphical presentation of the OHLC chart can be seen below;
The colour of each bar will be dependent on whether the close for the given period is higher compared to the previous close or the current periods open. If the close is higher the OHLC bar will typically be coloured black, where the close is lower the OHLC bar will instead be coloured red. Although these colours may differ and be based on personal preference.
The OHLC chart takes the standard line chart a few steps further, the line chart is a simple amalgamation of closing prices whereas the OHLC give an additional 3 data points (open, high and low). It is of extreme use when interpreting the market price and can also be used for forecasting future changes in price movement through use of patterns.