What Are OHLC Charts & How To Trade Them

OHLC, a.k.a. Open, High, Low, Close is a type of technical analysis that pinpoints price movements over a certain period. These charts may be considered highly effective by some traders, as they provide four important data points.

What are the OHLC charts?

OHLC charts compose of several lines that represent the opening, closing, high and low price of an asset. The vertical lines on the chart display highs and lows, while the horizontal left lines are opening prices, and lines to the right are closing prices. Overall, the structure is called the price bar.

The height of the vertical lines describes the period over a certain range. The vertical lines’ highs are price highs, and the low of the vertical lines are price lows.

When the prices rise, the right horizontal lines come above the left lines, mentioning closing prices are higher than opening prices. In this case, the price bar turns red or black. Contrarily, when the prices fall, the left horizontal lines come on top of the right lines; defining opening prices are higher than closing prices. In this scenario, the price bar turns white or green.

OHLC Charts
OHLC Charts

One of the main advantages of using the OHLC charts is that it presents more information than line charts. It is also different from candlesticks, as it displays vertical and horizontal lines, while the candlestick shows candles with wicks.

How to use the OHLC charts?

To trade on the OHLC charts, a trader needs to remember a few rules.

Firstly, the vertical height of the OHLC bar describes the volatility of a certain period. If the height is longer, then there is greater volatility, and traders should be careful about it.

Secondly, the left and right horizontal lines tell open and close prices relative to their highs and lows. If the closing price is higher than the opening price, it shows sellers are getting more dominant, and traders may  be looking to take sell positions. On the other hand, if the closing prices are lower than the opening prices, buyers gain more control, and traders may be looking to take buy positions.

Thirdly, when trading on the OHLC charts, traders need to familiarize themselves with the bar colors. In an uptrend, the bars turn green or white (depending on the chart settings), and in a downtrend, the colors turn black or red. Traders can take positions with these colors’ appearance and exit the trade when the bars change their color.

Lastly, reversals can occur on the OHLC charts. In an uptrend, when the opening price is higher than the closing price but is now below the previous price, there is a chance of a reversal. Conversely, in a downtrend, when the opening price is lower than the closing price, the price is currently higher than the previous price, a reversal can occur.

Remembering these rules can help traders interpret the OHLC charts more effectively.

OHLC charts trading strategy

The OHLC charts work on any timeframe like the 5-minute or the monthly chart. So, every type of trader can utilize OHLC charts.

OHLC charts buy strategy

  • The opening price must be higher than the closing prices.
  • Wait for the bars to turn green or white before entering.
  • Enter the trade after the formation of green or white bars.
  • Place a stop-loss near the recent low from the entry point.
  • Exit the trade when the bars change their colors.

OHLC charts sell strategy

  • The opening price must be lower than the closing prices.
  • Wait for the bars to turn red or black before entering.
  • Enter the trade after the formation of red or black bars.
  • Place a stop-loss near the recent high from the entry point.
  • Exit the trade when the bars change their colors.

OHLC charts conclusion

The OHLC charts are an effective way to measure the price movements. They present more data than line charts, and are similar to the candlestick charts. Various traditional trading patterns can also appear on the OHLC charts.

Becoming a successful forex trader can take many years of practice. It is not easy to make a living from forex trading in my opinion. It will require immense trading discipline, good money management, and a bullet proof trading plan.

Furthermore, I would combine multiple technical analysis, fundamental analysis, price action analysis and sentiment analysis to filter all forex trading signals whatever forex strategy I was using.

The methods of trading forex that are outlined within this article are just ideas. You should trade forex in a way that suits your own individual style, needs and goals.

If you would like to practice forex trading online, you can open an account with a forex broker and download a trading platform completely free of charge. If you are looking for a forex broker, you may wish to view my best forex brokers for some inspiration.

Happy trading!