When doing technical analysis, traders typically use candles. Candles are the most commonly used tool when displaying price action. Some traders use the OHLC bar.
Below we can see a comparison between the OHLC bar and traditional candles. On the left we have the OHLC Bars, on the right traditional candles.
How do OHLC Bars work?
On the left hand side of the bar, the opening price is displayed with a line, with the closing price then displayed on the opposite side of the bar as shown below.
From here we will then see a difference in price between the two lines, allowing us to see how much the price has changed from the opening to close.
Highs and Lows
When looking at OHLC bars, the maximum height of the bar is the highest price reached during that time period, this is shown with the star. The lowest point of the bar is therefore the lowest price of that cryptocurrency during the selected time period, displayed with the heart.
Through being able to see the daily highs and lows, we can now complete calculations based on the OHLC bar. Here is a calculation example for maximum possible daily loss below (assuming that no leverage is used):
* High = $10.2USD
* Low = $8.2 USD
100/10.2 = 9.80
9.80 x 8.2 = 80.36
100 – 80.38 = 19.64
From using the bars we have now calculated that the maximum daily loss if a user bought at the high and sold at the low was – 19.64%. This can also be calculated with traditional candles, but not with line or Heikin Ashi candles.
Green / Red bars
Like regular candles, the default settings for bars is that when a cryptocurrency increases in price over the set time period e.g. 1hr chart time setting or 4hr chart time setting, the OHLC bar will be green, as shown below.
However when the opening price is above the closing price, the cryptocurrency has clearly lost value. Therefore the bar for this time period will be displayed as red.
OHCL bars conclusion
The OHCL bars are great for displaying cryptocurrency price action and are typically favoured over line charts as they display greater accuracy through the visualisation of highs and lows. However, traders tend to use candles instead due to them being easier to see.
One way in which OHCL bar traders often make the bars easier to see, is through changing the colours from red and green with a black background into black bars with a white background as shown below.