What is OHLC

What is OHLC

OHLC stands for open, high, low close. It is an abbreviation that represents the changes that occur on an asset over time. The changes can be large or small, but at the end of the time period, the OHLC changes. In markets, the OHLC level fluctuates drastically depending on trading activity. This could be due to the volume of trades occurring in the market or due to macro economic factors e.g. a high in jobs losses.

Open

The prices the assets commenced with when the market first opened

High

The high is the highest price the assets reached during the day

Low

The low is the lowest price the assets reached during the day

Close

 The price of the assets when the market closed

Bar chart

When you integrate multiple of OHLC bars together, you create a bar chart. Each OHLC bar represents a unit of time. The for mentioned examples used days, but the unit can be anything e.g. a minute or a week. 

In most cases, the OHLC bars flow between each other. This means that the close price on an OHLC bar is normally the open price of another. There are exceptions to the rule. For example, in forex when the market closes on Friday the the Monday open price may differ from the previous closing bar.

Bearish bars vs bullish bars

A bar that’s close price closes above its open price is called a bullish bar. Therefore, a bar that’s open price closes below its closing price is called a bearish bar. The chart below shows a bullish bar in blue and a bearish bar in red. Depending on your trading platforms the colors may differ.

The concept of OHLC can be used and modelled in different forms, e.g. candle charts.

Candle chart

Candle charts use candles to represent the OHLC model.  The top tail, also known as a shadow of the candle represents the highest price. The bottom tail represents the lowest price. The top and bottom bars of the candle are used to represents either the open and close price.

If a candle is hollow it means the candle is bullish. If the candle is filled, then it’s a bearish bar. Note that there are a lot of different variations of candle bars, depending on your trading platform both of the candles may be filled in. The below chart shows an example of coloured candles.

Written by James Ogunsanwo