Understanding OHLC

"Tags: OHLC, open price, high low close, price bar Prerequisites: understanding-chart-timeframes Open, high, low and close are the four coordinates that summarise a period of trading. Questions this article answers What do open, high, low and close mean? How are these values used to build a candle? Why is the close important? What can OHLC not tell you? 1. The four values OHLC stands for Open, High, Low and Close. These four values summarise the price range and endpoints of a selected period. The period may be one minute, one hour, one day, one week or another timeframe. 2. Open The open is the first eligible traded price recorded for the period by the data source. On an intraday candle, it is the first trade in that intraday interval. On a daily candle, it is the first traded price of the session under the exchange's opening mechanism. The open can differ sharply from the previous close when overnight information changes demand and supply. 3. High The high is the highest traded price reached during the period. It tells us the upper extreme but not how long price stayed there or how much volume traded at that exact level. 4. Low The low is the lowest traded price reached during the period. Like the high, it records an extreme. It does not tell us whether the level was touched briefly or traded heavily. 5. Close The close is the final closing value for the selected period according to the data source and market rules. On a daily chart, the close is widely followed because it summarises where the market finished after the session's competition. The close is important, but it is not automatically more predictive than all other information. 6. OHLC example 7. Range The total range is the high minus the low. In the example, the range is Rs 108 minus Rs 97, or Rs 11. Range describes how far price travelled between extremes. It does not equal the trader's profit or loss. 8. Net change within the candle The difference between the close and open shows whether the period ended above or below where it began. In the example, the close was Rs 5 above the open. This relationship creates the candle body. 9. Previous close vs current open The current open should not be confused with the previous close. If yesterday closed at Rs 95 and today opens at Rs 100, the market has opened with a Rs 5 upward gap. The candle body for today still begins at Rs 100, not Rs 95. 10. What OHLC does not tell you OHLC does not show the exact sequence of every transaction inside the period. A daily candle with a high of Rs 108 and a low of Rs 97 does not tell you whether the high came before the low. It also does not show how much time was spent at each price or the volume distribution inside the candle. 11. Why two different sessions can have identical OHLC Two sessions can share the same open, high, low and close while following very different intraday paths. This is a limitation of compressed data. The candle summarises the period but removes sequence detail. 12. Data-source differences Small OHLC differences can occur because of exchange selection, adjusted data, auction sessions, corporate actions or provider methodology. Always verify the source before assuming one platform is wrong. 13. Common beginner mistakes Confusing open with previous close They are separate values and can differ because of a gap. Assuming the high traded for a long time The price may have touched the high only briefly. Treating a wide range as an automatic opportunity Wide range may also mean higher volatility and risk. Ignoring the timeframe OHLC values have meaning only for the period they summarise. Believing OHLC reveals the exact intraday sequence It does not. 14. DStreet principle OHLC describes the boundaries and endpoints of a period. Use it to observe, not to invent a story that the data does not prove. 15. Beginner checklist Open is the first price of the period. High is the maximum traded price. Low is the minimum traded price. Close is the final closing value. Range equals high minus low. The current open can differ from the prior close. OHLC does not reveal the full transaction sequence. 16. Quick knowledge check Question: What does OHLC stand for? Answer: Open, High, Low and Close. Question: How is the total range calculated? Answer: High minus low. Question: Can the current open differ from yesterday's close? Answer: Yes. Question: Does the high tell you how long price stayed there? Answer: No. Question: Can identical OHLC candles have different intraday paths? Answer: Yes. 17. Next lesson How Candlesticks Work. The next article turns OHLC values into the body-and-wick format used on most trading charts."