OHLC charts VS Candlestick Charts
These are two of the most popular ways of displaying data on our charts. They both display the high, open, low, and close of each bar. This means that the information that they display is identical, and it is purely stylistic choice between OHLC charts and Candlestick charts.
Are OHLC charts better than Candlestick charts?
OHLC charts display the information on the chart in a very simplistic manner. This means that, with the way we view them, they put near equal weight on the lows of each bar.
This can be good or bad depending on your own trading style. If you consider the wicks or the tails of the OHLC bars to be less important (a common method when trading candlesticks) reading the OHLC charts becomes more difficult. Without the emphasis of the difference between the open and close, OHLC charts tend to be less visual.
OHLC charts and the Opens and Closes
With OHLC we have a similar weight between the highs, lows and the difference between the open and the close. This is because OHLC charts have a consistent thickness when used on standard settings. This delivers the same information as Candlestick charts, but does not “look” the same. We have to take a wider view of the proccess of reading charts from a human’s perspective.
How we weight visual ques:
When we look at a trading chart, our eyes are scanning in two separate ways. One way is where we are looking at the values displayed on the chart, and the other is the subconscious way that we interpret the chart. Therefore since the data that is displayed is identical between these chart types, we can disregard the first set of information. Both charts are identical.
The second way we interpret the charts is where the difference between these two chart types come into play. Our eyes are searching for visual ques. When we see two lines, independent of what they mean to us in terms of index value, we will “weight” them. This weight will be determined by color, thickness, and position. The key here is thickness. The difference in thickness for the wicks/tails of the bars are where we either add or remove subconscious value from them.
Clear cut value on charts:
With Candlestick charts, the value of the wicks is considered to be less since they are far less impactful on the charts. The wicks, sometimes stretching a long distance, will show a very low value in our minds. This works perfectly for traders who consider the wicks to be less important than the difference between high open and close.
If you do not weight the difference between the open and close more than the high or low, OHLC charts work better. They display exactly where the price reached, and still provide the information of the open and close difference.