InvestorQ : How the bar chart is different from the line chart or is it one and the same?
Ria Roy made post

How the bar chart is different from the line chart or is it one and the same?

Answer
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Mahil Khan answered.
1 year ago


One of the downsides of the line chart is that it totally ignores the intraday price movement. For example, if two stock closing prices are up by 2% on over the previous day, then these two stocks would have similar plots on the line chart. But then one stock could have seen 8% volatility in a day and the other could have seen only 3% volatility in the day. This intraday volatility is best captured by the bar chart. It is probably the most popular charting method in the field of trend analysis of the technicals of a stock or an index. This type of chart can show the opening, high, low, and closing price of a particular security on a particular day. This can give traders a better idea of how the stock traded throughout the day, or its daily volatility. In other words it captures the intraday volatility more convincingly compared to the line chart.

Let us understand how a bar chart works in practice. The open, high, low, and close are required to form the price plot for each period of a bar chart. The high and low are represented by the top and bottom of the vertical bar. The opening price and the closing price are represented on the vertical line by a horizontal dash. The opening price on a bar chart is illustrated by the dash that is located on the left side of the vertical bar. Conversely, the close is represented by the dash on the right. One of the major advantages of the bar chart over the line chart is that it also captures the intraday volatility, which is it is also called the OHLC (open, high, low, and close). Intraday traders and short term traders who are trying to trade the short term volatility and the short term shifts in the market trends use these bar charts / OHLC charts extensively to get unique insights into the stock.