Reading Bars
Reading bars is one of the most popular methods of charting and financial market analysis, second only to candlestick charting. This method is popular because the simple graphic depiction of the day’s trading makes it easy for traders to identify and predict trends. Here are the basics of reading bars.
Know the time frame. A bar may represent a day, a week, or even five minutes.
Know what the vertical length of the bar represents. Generally, the length of the vertical bar itself indicates frame’s highs and lows, also known as the range of the bar.
Know what the horizontal lines mean. Usually, the a bar will show the opening and closing prices of the market during the given time frame, often with the two prices in different colors.
Know the direction of the bar. This can be gathered from the relationship between the opening and closing price. If the opening price is lower than the closing, then the bar and the market are both moving in an upward direction; if the closing price is lower than the opening, then there is a general downward direction.
As you can see, reading bars is actually very easy. Because no analysis is needed, bars can be produced in very short time intervals, even immediately with the use of software programs designed for this purpose. For this reason, many traders use either bars or candlesticks to identify common patterns so they can act before upturns or downturns actually occur.
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