Search
Close this search box.

Table of Contents

OHLC Chart

Definition

An OHLC chart, or Open-High-Low-Close chart, is a type of financial chart used to represent the price movement of an asset, such as stocks, commodities, or currencies. It displays four key data points for a specific time period: the opening price, the highest price, the lowest price, and the closing price. These data points are typically represented as vertical bars with a horizontal tick mark on each side, with the left tick indicating the opening price and the right tick indicating the closing price.

Phonetic

The phonetics of the keyword “OHLC Chart” is: O – ʌʊ (as in “owe”)H – eɪʧ (as in “aitch” or “h”)L – ɛl (as in “el”)C – si (as in “sea” or “see”)Chart – ʧɑrt (as in “chart”)So, together it would be pronounced: ʌʊ-eɪʧ-ɛl-si ʧɑrt.

Key Takeaways

  1. OHLC Chart stands for Open, High, Low, Close Chart, which is a type of financial chart specifically used for illustrating the movement of prices for an asset (such as stocks or commodities) during a specific time frame.
  2. Each vertical bar or “candlestick” in an OHLC Chart provides key information about the asset’s price at a particular time. The Open and Close prices are represented by the horizontal lines found at the top and bottom of the bar, while the High and Low prices are represented by the full range of the vertical bar.
  3. OHLC Charts are commonly used by investors and traders for technical analysis to identify trends, support and resistance levels, and potential price reversals, thus aiding in making informed decisions about buying and selling assets.

Importance

The OHLC (Open, High, Low, Close) Chart is important in business and finance because it provides a comprehensive visual representation of a security’s price movement within a specified period. This chart is particularly helpful for traders and investors as it offers valuable insights into market trends, price fluctuations, and trading volume. By analyzing OHLC charts, market participants can make informed decisions on their entry, exit, and risk management strategies. Incorporating key price levels (open, high, low, and close), the OHLC chart provides a holistic understanding of the market performance, thus assisting in better decision-making and maximizing potential returns.

Explanation

An OHLC chart, or Open-High-Low-Close chart, is a visual representation of financial data, primarily used in financial markets to analyze the price movements of assets – such as stocks, commodities or currencies – during a specified time frame. The primary purpose of these charts is to provide essential information to traders and investors, assisting them in making informed decisions about when to buy, sell, or hold a particular asset. By clearly illustrating key data points – the opening, highest, lowest, and closing prices for the period in question – an OHLC chart enables users to spot trends and patterns within the price chart quickly, assess volatility, and draw valuable insights into the asset’s performance.

The OHLC chart is widely used in technical analysis, an analytical discipline that uses past market data to predict future price movements. Packed with useful detail, OHLC charts not only depict the overall price range of an asset within the given time frame but also convey other critical factors, such as the asset’s initial direction upon market opening, its reversal points, and its closing direction. This valuable visual information informs traders’ decisions when judging a suitable entry or exit point for their positions and plays a critical role in formulating better trading strategies. As such, an OHLC chart is an indispensable tool in the arsenal of both novice and seasoned traders, helping them to navigate the constantly fluctuating financial markets.

Examples

1. Stock Market Analysis: A stock market analyst may use an OHLC chart to better understand the performance of a company’s shares over a specific time period. By analyzing the opening, high, low, and closing prices, they can gain insight into price trends, market volatility, and identify potential buy/sell signals. For example, an analyst may examine the OHLC chart of Apple Inc. (AAPL) to determine the ideal time to invest in its stocks based on historical price data and trends.

2. Commodity Market Evaluation: Commodity traders often rely on OHLC charts to track the price movements of commodities such as gold, oil, or agricultural products. For instance, a commodities trader could study the OHLC chart of crude oil prices during a global economic crisis to assess potential supply and demand effects on the market. By understanding the price fluctuations and the commodity’s overall performance, traders could make informed decisions on whether to place long or short positions on the respective commodity.

3. Historical Currency Exchange Rate Analysis: Forex traders often use OHLC charts to evaluate how currency exchange rates have performed over a specific time frame. By examining the opening, high, low, and closing rates of a currency pair like EUR/USD, a trader can determine potential support and resistance levels, analyze market trends, and establish strategic trading plans. For example, a forex trader may look for opportunities to buy low and sell high based on the historical OHLC chart patterns of their chosen currency pair.

Frequently Asked Questions(FAQ)

What is an OHLC Chart?

An OHLC Chart, also known as Open-High-Low-Close Chart, is a type of financial chart that displays the opening, highest, lowest, and closing prices of a security or trading instrument, such as stocks, commodities, or currencies, over a specific time period. It provides a visual representation of the price movements, making it easier for investors and traders to analyze market trends and make informed decisions.

What do the components of an OHLC Chart represent?

The components of an OHLC Chart are as follows:1. Open – The opening price of the security at the beginning of the trading period.2. High – The highest price that the security reached during the trading period.3. Low – The lowest price that the security reached during the trading period.4. Close – The closing price of the security at the end of the trading period.

How do I read an OHLC Chart?

Each unit, or “bar” , on an OHLC Chart typically represents a single trading period, such as a day, week, or month. The vertical line extending from the top to the bottom of the bar represents the high and low prices during that period. Short horizontal lines extending to the left and right of the vertical line represent the opening and closing prices, respectively. The opening price is typically displayed on the left, while the closing price is on the right.

How can OHLC Charts help me in making investment decisions?

OHLC Charts provide valuable insights into the price behavior of a security. By analyzing price patterns, trends, and fluctuations over time, investors can make informed decisions about when to buy or sell a security. This information can be used to identify potential entry and exit points, as well as to determine the overall strength of the market.

Are OHLC Charts the same as Candlestick Charts?

OHLC and Candlestick Charts are similar in that they both display the open, high, low, and close prices for a specific time period. However, Candlestick Charts use different visual representations through colored “candles” and their “wicks” to display the same information. Additionally, Candlestick Charts are more focused on the relationship between the open and close prices, while OHLC Charts provide equal emphasis on all four price points.

Where can I access OHLC Charts?

OHLC Charts are widely available on various financial websites, online trading platforms, and financial analysis software. Many platforms also offer customization options to tailor the chart’s appearance and timeframes based on the user’s preferences.

Related Finance Terms

  • Candlestick chart
  • Technical analysis
  • Trading volume
  • Price movements
  • Support and resistance levels

Sources for More Information

About Our Editorial Process

At Due, we are dedicated to providing simple money and retirement advice that can make a big impact in your life. Our team closely follows market shifts and deeply understands how to build REAL wealth. All of our articles undergo thorough editing and review by financial experts, ensuring you get reliable and credible money advice.

We partner with leading publications, such as Nasdaq, The Globe and Mail, Entrepreneur, and more, to provide insights on retirement, current markets, and more.

We also host a financial glossary of over 7000 money/investing terms to help you learn more about how to take control of your finances.

View our editorial process

About Our Journalists

Our journalists are not just trusted, certified financial advisers. They are experienced and leading influencers in the financial realm, trusted by millions to provide advice about money. We handpick the best of the best, so you get advice from real experts. Our goal is to educate and inform, NOT to be a ‘stock-picker’ or ‘market-caller.’ 

Why listen to what we have to say?

While Due does not know how to predict the market in the short-term, our team of experts DOES know how you can make smart financial decisions to plan for retirement in the long-term.

View our expert review board

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More