High-Powered Investing All-in-One For Dummies, 2nd Edition

Chapter 2

Bars and Bar Reading

In This Chapter

Mining information from basic bars

Identifying trends by reading bars

Becoming familiar with special bars

Getting the lowdown on spikes and gaps

All indicators (except volume) use the components of the price bar in one way or another to give evidence of the next move. The bar and its components are the raw material of indicators, so to speak. Traders devise indicators by choosing one or more bar components and crunching them arithmetically to chip away noise and find the signal. They apply a slew of techniques — averaging, statistical measures, relative ranges evaluation, pattern identification, and so on.

With four bar components and multiple manipulations, the number of indicators that can be devised is enormous, and if you consider varying the number of bars covered, literally without limit. That's a chilling statement but don't be intimidated. After you really understand the bar, you'll be able to readily dissect and evaluate any new indicator you run into.

And, on their own, the price bar and its placement on the chart deliver ...