OHLC stands for Open, High, Low, and Close. It is a commonly used concept in trading and investing, especially in technical analysis. These four points of data, recorded for each trading period, form the foundation of many trading strategies and help investors assess market sentiment.
Content:
- OHLC Meaning
- Open High Low Close – Example
- Open High Open Low Strategy
- OHLC Vs Candlestick
- What Is The Use of OHLC?
- Quick Summary
- FAQs
OHLC Meaning
OHLC stands for Open, High, Low, and Close. The ‘Open’ indicates the price at which the first transaction was completed when the market opened. The ‘High’ and ‘Low’ reflect the highest and lowest transaction prices during the period, respectively. The ‘Close’ represents the final transaction price before the market closed for the given period.
Open High Low Close – Example
Let’s consider a case study of Infosys, a widely recognized company listed on the National Stock Exchange (NSE) of India.
On a certain trading day, Infosys opened at a price of ₹1,150 when the market commenced at 9:15 AM. As the morning progressed, the company released an optimistic quarterly report, sparking significant buying interest which drove the price to a daily high of ₹1,200 by midday.
However, in the early afternoon, a general market downturn led to some selling pressure, causing the stock’s price to dip to a daily low of ₹1,100. As the market stabilized and investors recognized the company’s strong financial performance, the stock regained value and ultimately closed at ₹1,175 at the end of the trading day at 3:30 PM.
Therefore, in the OHLC format, Infosys’ performance on that day would be represented as follows: Open – ₹1,150, High – ₹1,200, Low – ₹1,100, Close – ₹1,175. This information provides valuable insight into the stock’s volatility and price range during the day, informing future investment strategies.
Open High Open Low Strategy
The Open High Open Low strategy is a common trading method based on OHLC data. It relies on the principle that if a stock’s opening price is either high or low for the trading day, there’s a chance that the stock’s price will move in the opposite direction.
In this strategy, if the Open equals High, the trader may expect the stock’s price to move downward and can consider selling or shorting the stock. Conversely, if the Open equals Low, there’s an anticipation that the price will trend upward, which might be a signal to buy.
OHLC Vs Candlestick
The primary distinction between OHLC and Candlestick charts is their visual presentation. OHLC charts use simple bars denoting high, low, open, and close prices. In contrast, Candlestick charts have a vivid display where a filled or hollow body signifies the open-close difference, and ‘wicks’ indicate highs and lows, offering a more intuitive grasp of market trends. The difference between is defined comprehensively in the table below:
| Parameters | OHLC | Candlestick |
| Origin | Western Markets | Japanese Markets |
| Visual | Less Visual, uses bars and lines for representation | More Visual, uses colored bodies and wicks for representation |
| Ease of Interpretation | May require more experience to read quickly | More intuitive and easy to interpret at a glance |
| Speed of Price Movements | Can show price movements rapidly | Slower to show rapid price movements |
| Details of Price Data | Gives open, high, low, and close price data | Also gives open, high, low, and close price data |
| Trend Identification | Trends can be harder to identify for beginners | Trends are easier to identify due to color coding and more visual cues |
| Usage | Used more in technical analysis | Used in both technical analysis and pattern recognition |
What Is The Use Of OHLC?
The primary use of Open-High-Low-Close (OHLC) charts is to illustrate movements in the price of financial instruments over time. These charts are a valuable tool for traders and investors, allowing them to identify market trends, make informed decisions, and strategize their trades accordingly.
For example, suppose a trader is looking at the OHLC chart of a particular stock. The opening price is ₹100, the highest price reached is ₹120, the lowest fell to ₹90, and it closed at ₹110. This information helps the trader understand the stock’s daily volatility and can guide future investment decisions.
OHLC Full Form – Quick Summary
- OHLC stands for Open, High, Low, Close, which refers to the four key measurements of daily stock price activity.
- OHLC is a popular trading strategy that relies on price volatility during the opening hours of the market. It can be applied to both bullish and bearish markets.
- OHLC and Candlestick are two different methods of charting price movements. OHLC uses bars and lines, while Candlestick uses colored bodies and wicks. Both have their pros and cons depending on the trader’s preference.
- The main use of OHLC is to illustrate price movements over time. It helps traders to identify trends and strategize their trades.
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OHLC Meaning – FAQs
1.What Is OHLC?
OHLC is an acronym for Open, High, Low, and Close, which represents the four key data points in a single day’s trading session.
2.How is OHLC calculated?
OHLC isn’t actually calculated, but rather, it is recorded. The “open” is the price at which the first trade of a particular security occurs on a given trading day. The “high” and “low” are the highest and lowest security prices traded during the day. Finally, the “close” is the price at which the last trade of the day occurred.
3.How do I trade with OHLC?
Trading with OHLC involves studying the opening, high, low, and closing prices of security to predict future price movements. For example, if a security’s closing price is significantly higher than its opening price, it might indicate bullish sentiment, encouraging traders to buy. On the other hand, if the closing price is significantly lower than the opening price, it might suggest bearish sentiment, signaling traders to sell.
4.Does open high low strategy work?
The Open High Low strategy can indeed work, especially for intraday traders, as it takes advantage of the price volatility during the opening hours of the market. However, like any trading strategy, it requires careful analysis, and risk management and may not always lead to profitable trades.
