Candles or Bars?

Candle-ology

A common question from those starting out in reading the charts is:
"Should I use candlestick charts or bar charts?"

See some views on this issue below.

You are here: Candlestick Charts > Candles or Bars?
Related links: Candle Basics
Related links (for Toolbox Members): Candle-spotting (patterns explained);

Candlesticks

Remember, the basic candlestick (see below) indicates the total range in price during the "period". On a daily chart, it is the range in price in one day - in this case on the days of 13, 14 and 15 August.

The candle "body" indicates the price range from the open to the close. The top of the upper wick (if present) is the high for the period.
The bottom of the lower wick (if present) is the low for the period.
For a greater discussion about the white and black candles see the candle-basics page.

Simple daily candle chart.

Bars - HLC or OHLC

With the OHLC bar (see below), each vertical bar on the chart shows the total range in price in the "period". This chart covers exactly the same days as the candle chart at below left.

On the bar chart, the "tick" to the left of each bar is the open price for the period, and the tick to the right is the close price for the period.

"OHLC" is an abbreviation for "Open, High, Low, Close, and
"HLC" is for "High, Low, Close". The HLC chart is used by those people who believe that the open price for each period is not important.
Simple daily OHLC chart.

Candles or bars?

Okay, so, which should you use - a candle chart or a bar chart?
Below are two weekly charts of the same stock (CBA bank) and same period.
Each individual candle, and each bar, summarises the price action for one whole week.

Study the two different charts below, and consider these questions:
  • At a quick glance, how many of the weekly candles or bars are "falling" (with the close lower than the open)? That is, black candles are considered falling.
  • At a quick glance, how many of the weekly candles or bars are "rising" (with the close higher than the open)? That is, white candles are considered rising.
  • At a glance, which weeks had the weekly close roughly the same as the open fot the week? With a candle, it is a doji pattern (see below right).
  • At a glance, which weeks were bullish (closing on the high for the week, as for week of 27 August)?
Weekly candlestick chart.
Weekly OHLC chart.

Summary

It seems as though many of the experts who have been in the industry for a number of years have been accustomed to bars. But in recent years as candlestick charts have become more wide spreadspread, many people new to the study have thought that candlestick charts are easier to interpret "at a glance".

For someone starting out now, it is more likely that candlestick charts will be seen to be easier to use.

Doji candles

Doji candles

The information presented herein represents the opinions of the web page content owner, and
are not recommendations or endorsements of any product, method, strategy, etc.
For financial advice, a professional and licensed financial advisor should be engaged.

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Copyright 2012, R.B.Brain - Consulting (ABN: 52 791 744 975).
Last revised: 19 June, 2012.