Bar charts display the same information as candlestick charts but in a slightly different way.
The open is a horizontal line facing left, while the close is another horizontal line but facing right. The body is a vertical line that displays the high and low of a certain time period. For the timeframe you select (e.g., 1 day), a new bar will be shown every 24 hours.
As with candlestick charts, a long bar indicates strong buying or selling pressure, while a small vertical line indicates low price volatility. You can also compare the close of a bar chart with the length of the range in prices, that is the difference between the high and the low.
Bar charts on Interdax are colour coded where a down bar is red and an up bar is green.
For example, one rule of thumb is to split a bar chart’s range into thirds. If there is a bullish move, you’d want to see the bar close in the upper third to confirm that - at close - bulls are still in control. On the other hand, if the close is in the middle or lower third, then it suggests bulls had control but lost it.
Similarly, for downward moves, you’d want to see the bar close in the lower third to confirm that the bearish momentum will continue. If the price closes in the upper or middle third, then we cannot be as sure that the price will continue to fall, as bulls bid the price back up before the close.
We can also identify trends and reversals with bar charts. For instance, with two up bars, the price closed higher than the previous close two sessions in a row, indicating more buyers than sellers. On the other hand, with two down bars, the opposite is true.
Bar charts also display inside days - where the range is within the range of the previous day’s bar. Inside days are important as these price ranges act as reference points and are associated with pauses in the market.
Outside days are where the bar engulfs the previous day’s bar and often market important turning points. An example is shown in the chart below.
A key reversal day is a type of outside day where the close of the second bar is higher/lower than the first bar’s high/low. The example above is a downside key reversal day as the price closed below the low of the green bar before it.
In summary, bar charts show the same information as candlestick charts but is just presented in a different way.