Bar charts are the workhorse of technical analysis. The majority of charts you will see in books, magazines, and online will be bar charts, so it pays to learn what each component means.
The “bar” in bar chart is a vertical line in which the top denotes the high price of the period and the bottom denotes the low. Off on the left of the bar is a horizontal line denoting the opening price and off on the right is another horizontal line denoting the close. A bar therefore includes all four of the key price components — the open, high, low and close, sometimes abbreviated OHLC.
All software allows you to stipulate how much time you want your bar to encompass. You can have 5-minute bars, 15-minute bars, 1-hour bars, 4-hour bars, etc. In Forex, the most commonly used bars are the 15-minute, 1 and 4-hour, and daily. Be careful to seek out the time parameter of the bars on a new chart prepared by someone else. Unless a chart is labeled otherwise, you are usually safe assuming a chart is of daily bars.
The Four Bar Components
The open refers literally to the first price at which a trade is actually done in the period. Usually the open is the same or very close to the previous close, but the open can be important if it is far away from the close of the previous period, and especially if the open is a gap. The chart below shows EUR/USD M1 chart with quite a few opening gaps up and down. We can assume that they are caused by either high market volatility or lack of liquidity at some price points.
EUR/USD M1 chart showing some opening gaps
Note that we get very few opening gaps on timeframes higher than 1-minute in Forex because of near-continuous trading. The only real opportunities for significant gapping are (1) the period between the end o