Mechanics and Dynamics of Charting
OHLC data is therefore simply a summary of price activity within a certain in-
terval or period. The longer the duration of the interval or period of the resulting
OHLC data, the higher will be the timeframe associated with such bars and can-
dlesticks. As can be seen in Figure 3.4, most charts are created from basic OHLC
data, with the exception of the equivolume chart, which requires additional infor-
mation on volume in order to construct its bars. In short, equivolume bars require
OHLCV data, with V representing volume.
Figure 3.5 illustrates three different representations of the same sequence of
OHLC data in the form a line, bar, and candlestick chart.
When viewing charts, it is always best to turn off the auto‐scaling feature. Auto‐
scaling attempts to fill the entire screen with price activity. As such, the heights of
bars and candlesticks constantly change, depending on whether price is ranging or
trending. If prices are flat or ranging, it will expand all price activity and attempt to
stretch it across the entire screen, making low‐volatility activity seem more volatile
by increasing the height of all the bars and candlesticks on the screen. Conversely,
when prices are trending, auto‐scaling will shorten the height of all bars on thefigure 3.4 OHLC as the Basis of Most Chart Constructions.figure 3.5 Examples of Various OHLC‐Based Charts.
Source: MetaTrader 4