Bar charts are the most commonly used method of charting the market. The June 91 S&P500 is an example of a bar chart with open, high, low, and last price information, which also includes the volume and open interest of the future. Any time frame such as a daily, weekly, or hourly period may be used in a bar chat, but hte daily time frame is the most popular.

Bar charts depict price information with vertical bars. Volume is represented by a vertical bar drawn at the bottom of the chart. Open interest is usually depicted as a continuous line drawn above the volume. The vertical price bar contains the following information:

1. Open: The open is the first price recorded, or the opening range for the period. The point on the left side of the bar is the open.

2. High: The high for the day is the highest point on the bar.

3. Low: The low for the day is the lowest point on the bar.

4. Close: The close, or settlement price, is the last price or closing range for the day. The point on the right side of the bar is the closing price.

Japanese Candlestick Charts

Japanese candlesticks are an oriental variation of the western bar chart (or perhaps it is more correct to say bar charts are a variation on candlesticks, because candlesticks may have a longer history). The construction of candlesticks will be done in this section, and some of the trading patterns will be covered in the pattern recognition section. Candlesticks may be used just like bar charts and may also represent any time frame.

The top and bottom of the candlestick represent the high and low for the day, just as in regular bar charts. Where the candlestick varies is in the representation of the close and open. The wider part of the candlestick, called the real body, is the difference between the close and open for the day. If the body is white, the close is higher than the open; so the close is the top of the rectangle and the open is the bottom of the rectangle. If the body is black, the close is lower than the open; so the bottom of the rectangle becomes the close and the top of the rectangle signifies the open. A single horizontal line would imply the close is equal to the open, which is the same for bar charts. Any trading outside of the wider body is intraday activity, represented by the thin vertical line outside both the closing and opening range. The top thin vertical line is called the upper shadow, and the bottom thin vertical line is called the lower shadow.