Technical analysisModule 1, lesson 2 of 32
Open, high, low and close
How the open, high, low and close of a trading session are formed, how Indian exchanges set the official closing price, and what a bar's range says about a session.
In this lesson
- Explain how the open, high, low and close of a session are formed.
- Explain why the official closing price may differ from the last trade.
- Calculate a session's range and where the close sits within it.
- Interpret what a session's OHLC values suggest, and what they do not.
Builds on
- Understanding price chartsOHLC values are what bar and candlestick charts draw, as that lesson introduces.
On this page
In simple terms
Every trading session, a day, a week or a minute, can be summarised by four prices:
- Open: the first price of the session.
- High: the highest price traded during the session.
- Low: the lowest price traded.
- Close: the official price at the end of the session.
These four values, often written OHLC, are what bar and candlestick charts draw. They compress thousands of trades into four numbers.
How each value is formed
The open. On Indian exchanges, the trading day begins with a pre-open call auction, as the how stock exchanges work lesson describes. Orders are collected and a single opening price is worked out, which reduces wild swings in the first minutes. That price is usually the day's open.
The high and low. The highest and lowest prices at which trades actually happened. A single large order hitting a thin order book can set an extreme high or low that lasts only seconds.
The close. You might expect the close to be the last trade of the day. On Indian exchanges, the official closing price is instead calculated as an average of trades over a final period of the session. Using an average makes the close harder to push up or down with a few last-minute trades, which matters because closing prices are used to value portfolios, calculate indices and set the next day's price bands. The exact method is set by the exchanges.
The range and where the close sits
The range of a session is the high minus the low. A wide range means the price moved a lot during the session; a narrow one means it was calm. Average range over many sessions is a simple measure of volatility, developed further in the average true range lesson.
Where the close sits within the range is also informative.
close location = (close − low) ÷ (high − low)
A value near 1 means the price closed near the high; near 0, near the low.
Worked example: Three made-up sessions
| Session | Open | High | Low | Close | Range | Close location |
|---|---|---|---|---|---|---|
| A | 500 | 520 | 498 | 518 | 22 | 0.91 |
| B | 500 | 512 | 480 | 482 | 32 | 0.06 |
| C | 500 | 504 | 497 | 501 | 7 | 0.57 |
In session A, buyers dominated to the end, and the price closed near its high. In session B, the price rose early but sold off to close near its low, on a wider range. Session C was quiet, with a narrow range and a close near the middle.
What OHLC does and does not tell you
OHLC values tell you the boundaries of a session and where it ended. They do not tell you:
- the order of events: whether the high came before the low or after;
- how long the price spent at each level;
- how much traded at each price;
- why the price moved.
Two sessions with identical OHLC values can have had very different paths. Intraday charts, with shorter periods, show more of the path but bring more noise.
Gaps between sessions
When a session opens well above the previous session's high, or well below its low, there is a gap: no trades happened in between. Gaps often follow news released when the market is closed. The price gaps lesson covers them, including the risk they create for stop-loss orders.
Why it matters
OHLC values are the raw material of almost every chart and indicator. Knowing how each is formed, especially the opening auction and the averaged close, helps you read charts accurately and understand why a share's close may differ from the last price you saw on your screen.
Limitations
OHLC data summarises a session and hides what happened inside it. Highs and lows can be set by a few small trades in thinly traded shares. Closing price methods are set by the exchanges and can change, so check the exchange's current method if precision matters.
Common mistakes
- Assuming the close is the last trade.
- Reading the order of events from a single bar.
- Treating an extreme high or low in a thin share as meaningful.
- Ignoring the range and looking only at the change from the previous close.
Try it yourself
- Find the OHLC values for any share for the last five trading days on the exchange website.
- Calculate each day's range and close location.
- Note which days closed near the high and which near the low.
- Check the news for one day with a wide range and see whether there was an announcement.
Key takeaways
- The open is the first price of the session, set on Indian exchanges by the pre-open auction. The high and low are the highest and lowest prices traded. The close is the session's official closing price.
- Indian exchanges calculate the official closing price as an average of trades over a final period of the session, not simply the last trade, which makes it harder to manipulate.
- The range, high minus low, shows how much the price moved during the session. It is a simple measure of volatility.
- Where the close sits within the range shows whether buyers or sellers had the upper hand by the end of the session, but not why.
- OHLC values summarise a session; they hide the path the price took in between.
Check your understanding
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Terms used in this lesson
- OHLC
- The open, high, low and close of a trading session, the four prices that bar and candlestick charts draw.
- Closing price
- The official price at the end of a trading session, used to value holdings, calculate indices and set the next day's limits.
- Last traded price
- The price at which a share most recently traded. It is a record of the last trade, not a price anyone is promising you.
- Price gap
- A jump between one trade and the next with no trades in between, often between one day's close and the next day's open.
References
- Equity market pre-open session, National Stock Exchange of India. How the pre-open session sets the opening price on NSE.
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This lesson is general education, not investment advice. Examples use made-up or clearly dated figures to explain ideas; they are not recommendations. Read the disclaimer.