🎯 In 30 seconds: A price bar squeezes a stretch of trading into four prices: open, high, low and close. That is useful, and it also throws away detail, such as which came first, the high or the low. Bars of different sizes nest inside each other, and today’s bar is unfinished until the session closes. Use a log scale when price has moved a lot, and make sure old prices are adjusted for splits and dividends before you draw anything on them.
What one bar keeps and what it drops
A bar is a summary. It records the first trade, the highest trade, the lowest trade and the last trade of its period, plus the total volume. Everything in between is gone.
Look at what the daily bar hides. Midway through the session the stock fell to $48.50 and many holders may have been nervous. The daily candle shows only a lower wick. It does not tell you whether the low came at 10 a.m. or 3 p.m.
That matters when you test rules. If a bar touched both your stop and your target, the bar alone cannot tell you which was hit first. Careful tests assume the worse outcome, or check a smaller bar size.
Where the close sits in the range
One of the most useful readings of a single bar is where it closed within its own range. A simple ratio does it:
Close position = (close minus low) / (high minus low)
The answer runs from 0 (closed at the low) to 1 (closed at the high). For the daily bar in the figure: ($52.20 minus $48.50) / ($52.50 minus $48.50) = $3.70 / $4.00 = 0.93. Buyers held control into the end of the day.
A close near 1 after a long fall says sellers ran out of push by the close. A close near 0 on a day that opened strong says the early buying did not last. One bar proves little, but a run of closes in the top or bottom quarter of their ranges deserves a line in your journal. The single-candle chapter builds on this.
Bar styles in the chart tool
| Style | What it draws | Good for |
|---|---|---|
| Candlesticks | A body from open to close, wicks to high and low | Seeing who won each period at a glance |
| Hollow candles | Body filled or hollow by close versus open, colored by close versus the prior close | Spotting days that rose from the open but still closed lower than yesterday |
| OHLC bars | A vertical line with a tick left for the open and right for the close | Dense charts where wide bodies get in the way |
| HLC bars | The same without the open | Markets where the open carries little meaning |
| Line and mountain | Closes only, joined up (mountain shades below) | Long histories and clean trend reading |
| Baseline | Closes colored above or below a reference price | Tracking a position against your entry price |
All of these come from the same four prices. Switching between them is a cheap way to check a read. If a pattern is only visible in one style, be skeptical of it.
Time frames nest inside each other
A weekly bar is built from the week’s daily bars: Monday’s open, the week’s high and low, and Friday’s close. A daily bar is built from intraday bars the same way.
| Bar size | Bars in a regular 6.5-hour U.S. session | Typical use |
|---|---|---|
| 5 min | 78 | Fine timing within one day |
| 15 min | 26 | Intraday structure |
| Hourly | 7 (one of them covers only half an hour) | Swing timing over a few days |
| Daily | 1 | The main view for most swing traders |
| Weekly and monthly | a fraction of one | The big picture and long trends |
Two practical points follow. First, short bars are noisier: a bigger share of their movement is random back and forth. Second, every pattern on a short bar size sits inside some larger bar. Read the larger one first. The multiple time frames chapter turns this into a routine.
Linear or log scale
On a linear scale, each dollar takes the same height. On a log scale, each percentage change takes the same height.
A move from $10 to $20 and a move from $40 to $80 are both 100% gains. A log scale shows them as equal. A linear scale makes the second look four times larger, which can fool you into seeing a “blow-off” in what is really a steady trend.
A rough rule: when the chart covers a price change of more than about 50%, switch to log. For a few weeks of a quiet stock, the two look almost the same. Trendlines in particular can change meaning between the two scales, which the trendline chapter covers.
Adjusted data: splits and dividends
Companies change their share count and pay cash out. Both events shift the price for reasons that have nothing to do with supply and demand.
- Splits. In a 2-for-1 split, a $100 share becomes two $50 shares. An adjusted history divides all earlier prices by 2 and multiplies earlier volume by 2, so the chart stays continuous.
- Dividends. On the day a stock goes ex-dividend, its price usually drops by about the payout. Say a stock closes at $50.00 and then goes ex-dividend for $1.00. A dividend-adjusted series multiplies all earlier prices by ($50.00 minus $1.00) / $50.00 = 0.98. A $40.00 price from last year would show as $39.20.
Adjustment has a side effect. Old adjusted prices are not the prices people actually paid. A level that “everyone remembers” at $40.00 may sit at $39.20 on an adjusted chart. For long histories that does not matter much. For a support level from a few months back, it can.
If a chart shows a sudden drop of exactly one half or two thirds with no news, suspect an unadjusted split before you suspect a crash.
- A bar has high $30, low $26 and close $29. Where did it close in its range? Answer: ($29 minus $26) / ($30 minus $26) = 0.75, in the upper quarter.
- Why can’t a daily bar tell you whether a stop or a target was hit first? Answer: It keeps only four prices, not the order in which the high and low happened.
- When does a log scale help most? Answer: When the chart covers a large percentage change, because it shows equal percentage moves at equal heights.
- After a 3-for-1 split, how is an old $90 price shown on an adjusted chart? Answer: $30, since earlier prices are divided by 3.
Sources
- Steve Nison, Japanese Candlestick Charting Techniques (1991)
- John J. Murphy, Technical Analysis of the Financial Markets (1999)
- Robert D. Edwards and John Magee, Technical Analysis of Stock Trends (first published 1948)
- U.S. Securities and Exchange Commission, Investor.gov (investor education pages on stock splits and dividends)
- Moneydesks Technical Analysis tool (chart types, bar sizes and scale settings)