All advanced charting begins with four basic data points collected over a specific time interval.

These are:

• Open — the first trade in the interval
• High — the highest price reached
• Low — the lowest price reached
• Close — the final trade in the interval

Together, these four numbers summarize what happened during that period.

The relationship between open and close tells us directional bias. The distance between high and low tells us volatility. The position of the close within the range tells us conviction.

For example:

• Close near the high → buyers dominated
• Close near the low → sellers dominated
• Large range → high volatility
• Small range → compression

These four data points are the building blocks of both bar charts and candlestick charts.

Even the simplest line chart is usually built from the close.

Understanding OHLC is critical because:

• Indicators derive from them
• Patterns are defined by them
• Trend shifts are detected through them

Without knowing what data is being displayed, traders risk drawing incorrect conclusions.

Core Insights

• OHLC summarizes an entire time interval
• Each point carries structural meaning
• Volatility and conviction can be inferred
• All advanced charts are built from these values

A line chart is the simplest chart type. It connects one price per time interval — usually the closing price — with a continuous line.

Although it appears basic, it serves an important purpose: clarity.

By focusing only on closing prices, a line chart removes intraday noise and highlights overall direction. It sacrifices detail for smoothness.

This makes line charts particularly useful when analyzing:

• Long-term trends
• Index performance
• Multi-year structural moves
• Macro-level analysis

Because only one data point is used per interval, volatility inside the period is hidden. This is both a strength and a limitation.

Strength: it simplifies the story. Limitation: it hides internal movement.

Line charts are often preferred by investors who care about direction rather than intraday battle.

When to Use Line Charts

• Studying long-term movement
• Comparing asset performance
• Identifying macro trends
• Avoiding short-term noise

Limitations

• Does not show opening price
• Does not show volatility range
• Cannot reveal intraday reversals

A bar chart expands upon the line chart by incorporating all four OHLC price points.

Each vertical bar represents one time interval.

The components are:

• Top of bar → High
• Bottom of bar → Low
• Left tick → Open
• Right tick → Close

This structure provides significantly more information than a line chart.

Bar charts allow traders to evaluate:

• Intraday volatility
• Gap behavior
• Directional strength
• Reversal attempts

A longer vertical bar indicates greater range (volatility). A short bar suggests compression.

The relationship between the open and close can signal strength or weakness.

For example:

• Close above open → bullish session
• Close below open → bearish session

Bar charts balance information and simplicity. They are highly respected in professional trading environments.

Advantages

• Displays full range
• Shows open and close
• Reveals volatility
• Better for active trading

Limitations

• Less visually intuitive than candles
• Pattern recognition slightly harder

Candlestick charts present the same OHLC information as bar charts but in a more visually intuitive format.

Each candle contains:

• Real body → difference between open and close
• Upper shadow → high to body
• Lower shadow → low to body

If close > open → bullish candle If close < open → bearish candle

Candlesticks make pattern recognition easier because:

• Body size shows conviction
• Shadow length shows rejection
• Color differentiates bias

Large bodies suggest strong directional control. Long upper shadows suggest selling pressure. Long lower shadows suggest buying support.

Candlestick charts are widely used because they integrate price structure and psychology in one visual form.

Why Traders Prefer Candlesticks

• Easier pattern recognition
• Clearer trend shifts
• Emotional behavior visible
• Strong visual contrast

Limitations

• Can become cluttered on small intervals
• Still subject to noise

Data Intervals

Charts can be constructed using different time intervals. This is called the --data interval--.

Common intervals include:

• 1-minute
• 5-minute
• 10-minute
• Hourly
• Daily
• Weekly
• Monthly

Smaller intervals provide more detail but also more noise. Larger intervals smooth out volatility and emphasize structure.

For example:

A 10-minute chart in a 6.5-hour trading day produces 39 candles. A daily chart condenses that same activity into one candle.

Both describe the same day — but at different resolutions.

This concept reflects the fractal nature of markets. Patterns repeat across timeframes, but clarity varies.

Smaller Intervals

• More detail
• More volatility
• More false signals

Larger Intervals

• Smoother trends
• Less noise
• Clearer macro structure

Traders choose intervals based on time horizon.