When I click on "Chart Type" on my charting service, I'm offered five possibilities: Line, Candlestick, OHLC, Point and Figure, and Renko. I've investigated all of those choices, but I almost always choose one: candlestick.
OHLC and candlestick charts actually show much of the same information.
Annotated 15-Minute Candlestick Chart of the TRAN, as of 7/17:
Annotated 15-Minute OHLC Chart of the TRAN, as of 7/17:
If the information provided on both types of chart is similar, just in a different format, why do I prefer one over the other?
Perhaps the answer becomes clearer when we look at a 15-minute chart that spans three days rather than just two hours.
Three-Day Annotated 15-Minute OHLC Chart of the TRAN, as of 7/17:
Three-Day Annotated 15-Minute Candlestick Chart of the TRAN, as of 7/17:
While many charting systems default to the OHLC version of charts, traders might consider employing candlestick versions instead. Some traders listen to oddly named signals produced by candlesticks such as the harami, marubozu, dragonfly doji and concealing baby swallow, and dismiss candlestick theory as some kind of hoodoo charting system.
However, if you haven't tried candlestick charts previously, you might consider their readability and visual impact. While most charting systems now produce colored rather than black bars for the OHLC charting system, it's still easier to pinpoint a green or red or mixed trend on a candlestick chart, with the thicker candlestick bodies. Other benefits occur.
Annotated 15-Minute Candlestick Chart of the TRAN, as of 7/17, with Prices Springing from Support:
You don't need to know anything about candlestick theory or even believe it applicable to glance at what was happening on 7/16, and see that each probing of support was resulting in prices springing up again. Anyone in a bearish position and hoping for further price drops would be forewarned that every time prices dropped, the composite stocks were being bought and the TRAN was moving higher again. Profit-protecting plans could be made.
I personally find it more difficult to quickly scan an OHLC chart composed of vertical bars and easily pinpoint such action. I chose the TRAN to illustrate these points because it's one of the indices I typically watch quite frequently to get a feel for what's going on underneath the markets. As markets open, I quickly scan advance/decline, TRIN, VIX, RVX, SPX, BIX, SPX, OEX, NDX, SOX and TRAN charts, among others, and I consider the readability of these charts essential to forming a quick impression of what's going on. Maybe you will, too.