Ask Colin

Which is more useful, bar charting or candlestick charting?

Both of them are different. It is rather like asking which is more useful, a painting or a drawing? Like a painting compared to a drawing, they have the same subject, but are using different techniques to represent the subject. Each will emphasise different aspects.

Of course, the analogy can only be taken so far. A chart is representing on paper or a screen, the activity of buyers and sellers during a period of time. There are many ways to do this graphically, including line charts, bar charts, candlestick charts, swing charts, point and figure charts, equivolume charts, Steidlmayer distribution charts and so on. Each is highlighting specific behaviour of buyers and sellers, and/or summarising the activity so that certain features are easily seen.

Bar charts focus us on the high and low prices of each period. Candlestick charts focus us on the opening and closing prices of each period. To ask which of these is more important is to ask whether a person's height or weight are more important. You need both aspects to fully understand the person or the market.

Both bars and candlesticks contain the same information. The difference is only in what the chart form emphasises, or the relationships it focuses our attention on. So, depending on what behaviour of buyers or sellers we are looking for, one or the other chart form may be more useful. What we are looking for will be governed by our trading/investing plan.

So, to sum up, there is no absolute way of saying which is better. It all depends on what you are trying to do. It may be that you need one mainly, rather than the other, or that you need both.

Keyword: