A price chart is a compression of something much larger. Every tick that traded in a given period gets squeezed into a single mark, and the chart type you choose decides how much of that period survives the squeeze.
Four numbers describe any period
Whatever the timeframe — one minute or one month — a period of trading can be summarised by four numbers:
- Open — the first traded price of the period.
- High — the highest.
- Low — the lowest.
- Close — the last.
These are the OHLC values, and the difference between chart types comes down to how many of the four they bother to draw.
Line charts — close only
A line chart plots the close of each period and connects the dots. It discards three numbers out of four.
That sounds like a weakness, and for execution it is: a line chart cannot show you that price spiked 60 pips and came back, so it cannot show you where a stop would have been hit. But discarding data is sometimes the point. Strip out the intraday noise and the shape of a trend becomes obvious in a way it is not on a busier chart — which is why an analyst arguing that a pair has been range-bound for eight months reaches for one.
There is also a reasonable case that the close is the most meaningful of the four numbers: it is the price the market settled on after a full session of argument, not the price a single panicked order printed.
Bar charts — all four, drawn thin
A bar chart (an "OHLC bar") draws a vertical line from the low to the high, with a small tick on the left for the open and a tick on the right for the close. Nothing is lost.
Bars are compact. You can fit far more of them on a screen than candles without the chart turning into soup, which makes them useful for looking at long histories. Their drawback is legibility: whether the close was above or below the open takes a moment of squinting, and that relationship is the single most-consulted fact on a chart.
Candlestick charts — the same data, made obvious
A candlestick carries exactly the same four numbers as a bar. The difference is entirely presentational: the distance between open and close is drawn as a filled body, and the extremes beyond it as thin wicks. Body coloured one way means the close was above the open; the other way, below.
No extra information, but a large gain in speed. Direction is read from colour, conviction is read from body size, and rejection is read from wick length — all at a glance, across dozens of periods at once. That is why candlesticks became the default nearly everywhere.
The cost is visual weight. On a dense chart, candles crowd each other and start to look more significant than they are, which encourages reading meaning into every period. A bar chart is quieter about the same data.
The others you will meet
Heikin-Ashi candles average adjacent periods to smooth the chart. They make trends look cleaner and are genuinely useful for staying in a move — but the prices they display are averages, not prices that traded. Never take an entry or a stop level off one.
Renko, point and figure and range charts drop time from the axis entirely and print only when price moves a set distance. They filter sideways chop aggressively, at the cost of any sense of how long anything took — and time is information.
Choosing, in practice
Most traders settle on candles as the working chart and use a line chart occasionally to check whether the structure they think they see survives the removal of detail. That is a good habit: if a level only looks important on one chart type, it probably is not important.
The more useful variable is not the chart type at all — it is the timeframe. The same pair on a 5-minute chart and a daily chart supports opposite conclusions, and no amount of candle-reading resolves that.
What to take from this
- Every chart type draws some subset of open, high, low and close.
- Line charts discard three of the four — good for structure, useless for execution.
- Bars and candles carry identical data; candles just make it readable faster.
- Heikin-Ashi displays averaged prices, not traded ones — never size a stop from it.
- Timeframe changes your conclusion far more than chart type does.
Candles are the working chart for almost everyone, so the next lesson goes deeper into reading them — what an individual candle is telling you, and how much of that is worth acting on.