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An open, high, low, close (OHLC) chart is a type of securities chart that shows the different prices of a security during trading hours. Specifically, OHLC charts show the price when the market opens, the highest and lowest prices the security hit during trading hours, and the price of the security when the market closed each day. OHLC charts can cover different time periods, such as by week, month, year, or more. These charts are also known as OHLC graphs.
OHLC charts usually include a bar or line representing each day. The bottom of the line or bar indicates the day's lowest price, and the top shows the highest price of the day. The opening price is shown as a line or tick on the left side of the bar. The line on the right side of the bar illustrates the closing price. This visual interpretation of changing stock prices makes it faster and easier to see how much a stock price changed each day.
These charts can be used by financial analysts to follow stock movements and uncover short-term trends. OHLC charts are sometime used by day traders. Day traders buy and sell the same stock during the day. The goal of day trading is to make money on the volatility of the market. In addition, all types of investors can try to estimate changes in stock prices based on the trends shown in the chart.
Using the data, investors aim to predict the best time to buy or sell a stock. When reading such a chart, investors need to scrutinize any major change in stock price. They need to analyze not only the price of a certain stock, but also the prices of other stocks in similar sectors, the overall economy, and major events that happened during the time period recorded in the chart.
For example, the price of a pharmaceutical company’s stock price may have plunged on a particular day when one if its new drugs did not receive governmental approval. This will affect the price data shown in the chart and skew the overall results. If an investor did not investigate what happened on that day, his analysis would be incomplete. Without the approval information, the investor’s assumptions about when a stock price would change in the future may be incorrect.
These charts are valuable tools used to help predict future changes in stock price. Knowing the different external factors affecting stocks is also vital to making accurate predictions regarding prices. As a result, most investors use these charts as only part of their analysis to help them decide when to buy or sell a stock.