Bar charts is the most common type of day trading chart along with candlestick charts. The reason why most traders use bar charts is because they are very easy to read and are simple to use when you are tasked with the ultra stressful job of making money in the markets. Each individual bar that plots shows information in regards to the transactions that are occurring in the market.
Information Shown On Bar Charts
Each part of the bar shows specific information that we want to identify when we trade.
- Open: The first price of the bar that appears (first thing to plot)
- Close: The last price traded (last part of bar to plot)
- High: The highest price traded on that bar
- Low: The lowest price traded on that bar
Each part of the bar can show us certain behavior and momentum at the micro level. For example, if you see several bars moving up with closes at the very top of each bar, that signifies strength to the upside. You can see the range of transactions on the bar since you see both the high and low of the bars.
Time Frames of Bar Charts
There are many different types of time frames that someone can use for bar charts. The most popular are time based charts and volume charts for regular stock market traders. If you trade more specialized instruments like the futures market (what I trade) then tick charts are more popular.
- Time Based Charts
- Tick Charts – number of trades (my preferance)
- Volume Charts – number of contracts
Tick charts generally follow the Fibonacci day trading numbers, I personally trade the oil & the Emini S&P 500 and use the 610 & 233 charts for the ES. Both are Fibonacci numbers, you see my charts on my public market recaps and see my results via the income statements page.
Volume based charts are usually minute based such as a 10 minute or 15 minute charts. The time based traders are usually swing traders that use longer time frame charts such as a daily chart or even week based charts.