Introduction to the Bar Chart

As stated in the previous lesson, the bar chart is more commonly used by traders to display stock charts.

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One bar represents one segment of time whether it is one day, one week, or one hour.

When you are looking at the chart be sure you are aware of what time frame you are looking it.

So if we are looking at a "daily" stock chart then one bar would equal the price change for each day.

If it was a weekly price chart then each bar would represent one week's worth of price action.

There are two common types of bar charts: OHLC (open, high, low, close) and HLC (high, low, close):

types of bar chart

The open, high, low, and close refer to the price action of that particular time period. We will refer to the daily time period.

Open - This is the price of the first trade of the day (opening price for the day).

High - This is the highest price that the security (stock) traded during the day.

Low - This is the lowest price that the security (stock) traded during the day.

Close - This is the last price that the security (stock) traded during the day.

As an options trader you will use the chart to identify the prevailing trend and to time the entry and exit of your trades. Check out the video below to continue with this lesson.

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The next type of chart you will learn about is in Lesson 3: The Line Chart.

Module 4: Stock Charts

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