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Line, bar and candle: three views of the same data

Lesson 2 · about 7 min

Your platform will let you draw the same price history three ways: as a line, as bars, or as candlesticks. They contain the same trades. They differ in how much of each time period they show you. Knowing what each one hides is the whole point of choosing between them.

An OHLC bar and a candle showing the same pricesThe same open, high, low and close drawn first as a bar with side ticks and then as a candle with a body and wicks.high 26.80close 26.50open 25.40low 24.90OHLC BARCANDLEopenclosecloseopensame four pricesticks mark the open (left)and the close (right)body spans open to close,wick spans high to low
Bar and candle, same prices. A bar chart and a candlestick chart carry exactly the same four numbers for each period: open, high, low and close. Only the drawing style changes, so pick whichever you find easier to read.

The line chart

A line chart takes one price per period, usually the closing price, and connects the dots. That is it. If you are on a daily chart, each point is where the day ended.

 105 |                 /\
 104 |                /  \
 103 |          /\   /    \
 102 |         /  \_/      \
 101 |    /\  /             \
 100 | __/  \/               \__
     +---------------------------> days

What it shows well: the overall shape of a move. Where the market has been going over weeks or months is obvious at a glance, because there is no clutter.

What it hides: everything that happened inside each period. A day that opened at 100, spiked to 110 and closed at 101 looks identical to a day that sat at 101 all session. Those were very different days for the people trading them, and the line chart erases the difference.

Use a line chart when you want the big picture and nothing else. Many experienced traders glance at a line chart of the weekly or monthly timeframe before doing anything else, precisely because it strips out noise.

The bar chart

A bar chart shows four prices per period: the open, the high, the low and the close. Traders call this OHLC. Each period is a vertical line from the low to the high, with a small tick on the left for the open and a small tick on the right for the close.

        high
         |
   open -|
         |
         |- close
         |
        low

If the close tick is higher than the open tick, price rose during the period. If it is lower, price fell. Most platforms colour the bar green or black for up and red for down, so you do not have to squint at the ticks.

Now the spiky day from before looks different from the quiet day:

   Spiky day          Quiet day
      110 |
          |
          |
          |
    100 --|
          |-- 101      101 --|-- 101

The bar tells you that something violent happened, even though both days closed at 101.

The candlestick chart

A candlestick shows exactly the same four numbers as a bar, drawn differently. The distance between open and close is drawn as a filled rectangle, the body. The parts of the range above and below the body are drawn as thin lines, the wicks (also called shadows or tails).

  Up candle (close > open)     Down candle (close < open)

          |  <- wick (high)            |  <- wick (high)
        +---+ <- close               +---+ <- open
        |   |                        |###|
        |   |  <- body               |###|  <- body (filled)
        +---+ <- open                +---+ <- close
          |  <- wick (low)             |  <- wick (low)

By convention an up candle is hollow or green and a down candle is filled or red. Your platform will let you set the colours; the only thing that matters is that you can tell them apart instantly.

Why do almost all active traders use candles instead of bars? Because the body is easy to see. From across the room you can tell whether the last ten candles were mostly green or red, whether the bodies were big or tiny, and whether the wicks were long. A bar chart carries the same information but you have to look closely at tiny ticks to extract it. Candles make the fight between buyers and sellers visually obvious, and that is the thing you are trying to read.

Key idea: Line, bar and candle charts contain the same trades. A line shows one price per period and hides everything else. Bars and candles show open, high, low and close. Candles just make those four numbers easier to see at a glance.

The same day, three ways

Here is one trading day as a table of OHLC values, then rendered each way.

Period Open High Low Close
Day 1 100.00 104.50 99.20 103.80
  • Line chart: a single point at 103.80. You learn that it closed higher than yesterday, nothing more.
  • Bar chart: a vertical line from 99.20 to 104.50, open tick at 100.00, close tick at 103.80. You learn it opened, dipped slightly, ran up strongly and closed near the high.
  • Candle chart: a green body from 100.00 to 103.80 with a short upper wick to 104.50 and a short lower wick to 99.20. You learn the same thing as the bar, but you can see it in a tenth of a second.

Try it: Pull up a daily chart of anything liquid and switch between line, bar and candle views. Pick one candle with a long wick, then switch to line view and try to find that same day. You probably cannot. That is the information the line chart threw away.

Which one should you use?

Use candles for reading price action; this whole course assumes candles. Use a line chart when you want to see the shape of a long trend without distraction. Bars are fine if you prefer them; some old-school futures traders never switched. There is no edge in the choice itself. The edge is in what you learn to see.

Recap

  • A line chart connects one price per period (usually the close) and hides intraperiod movement.
  • Bars and candles both show open, high, low and close (OHLC) for each period.
  • Candles draw the open-to-close range as a body and the rest as wicks, which makes buyer-versus-seller strength visible instantly.
  • This course uses candles. Use a line chart when you want the long-term shape with no clutter.