They say a picture is worth a thousand words, but what about a chart? Wherever you find the truth behind the market, the trade tab in the tastyworks desktop trading platform has four different chart styles to help you with that.
What is the difference between a candle and a bar chart?
Both chart styles display the same data, but presents them differently.
A bar chart will display the open, high, low, and close in each bar, which is dependent on the chosen time aggregation. Each bar shows one of three colors: green, red, or grey. The color of the bar is dependent on the close of the previous bar. The height of the line indicates the high and low of the time. As the left horizontal line shows the opening price and the right horizontal line shows the closing price.
- Green bar: The closing price is higher than the previous bar.
- Red bar: The closing price is lower than the previous bar.
- Grey bar: The closing price is equal to the previous bar.
A candle chart is similar to a bar chart in that it displays an opening, high, low, and closing price of a chosen time aggregation. Unlike a bar chart, it also shows market sentiment, namely bullishness or bearishness. Each candle displays in one of three colors and indicates sentiment.
- Green candle: The closing price is higher than the opening price, which indicates a bullish sentiment.
- Red candle: The closing price is lower than the opening price, which indicates a bearishness sentiment.
- Grey candle: The closing price equals the opening price, which indicates no change in price.
What is the difference between a Line and Area Chart?
Both chart types display the close price in a clear and straightforward form. However, the area chart shades the area below the line. Both are good ways to look at the big picture when viewing an underlying over a more extended timeframe.