Education · Stage 3 · 01
Candle types: time, volume, range, tick — and two that redraw price
Every chart you have ever seen made a choice on your behalf: a new candle starts every five minutes. That is one option out of four, it is rarely the best one, and almost nobody is told the other three exist — never mind the two further down this page, which stop sampling the market and start rewriting what it looks like.
Mak · 7 min read · Stage 3, article 1 of 4
A candle is a summary of a period: where price started, how far it went each way, where it ended. The summary is not the argument. What counts as a period is, and there are four answers.
| Type | A new candle starts every… | So each candle holds |
|---|---|---|
| Time | 5 minutes, 1 hour, 1 day | the same amount of clock — and any amount of activity |
| Volume | 1,000 contracts traded | the same amount of trading — and any amount of clock |
| Range | 12 ticks of movement | the same amount of movement |
| Tick | 500 transactions | the same number of trades, whatever their size |
Note that volume and tick are not the same thing. Five hundred trades of one contract and five trades of a hundred contracts are the same volume and a very different number of transactions — one is a crowd, the other is somebody large. Tick bars notice the difference; volume bars do not.
What time bars do to your screen
The default has one consequence and it is worth seeing rather than reading.
This is why the same market can look calm on one screen and violent on another with nobody being wrong. The charts are not disagreeing about the market. They are disagreeing about what deserves space.
What each one is good at, and what it costs
- Time bars
- Everybody has them, so a level you draw is a level other people can see. They also compress the busiest minutes into one bar and stretch empty stretches across the screen.
- Activity bars — volume, tick, range
- Each bar carries a comparable amount of trading or movement, so bars form fast when it matters and slowly when it does not. In exchange, your chart no longer lines up with anybody else's, and the clock disappears from the horizontal axis.
There is one more difference worth knowing before you switch anything: an activity-based chart has no gaps in the usual sense. A time chart shows the overnight jump as a hole between yesterday's close and today's open. A volume chart simply carries on, because from its point of view nothing was skipped — trades happened, they just happened at a distance.
The requirement nobody mentions
Here is the part that connects this to everything earlier in this path, and it is the reason this article sits at the start of the stage.
Volume, tick and range bars are built by counting individual trades. If your feed delivers periodic snapshots instead of every event, they cannot be built correctly — and they will be drawn anyway.
The chart will look completely normal. The bars will close at plausible places. The numbers underneath will be a summary of a summary, and nothing will tell you. This is the same warning as the article on market data, arriving at the moment it starts costing you something.
Two more small traps in the same family:
- The session template decides where the day starts, and therefore where the first bar of the day begins. Two people with different templates get different bars.
- Bar settings are not comparable between platforms. A «1000 volume» bar depends on how that platform counts, so a setting copied from someone else is a guess, not a match.
Two more that do not sample — they redraw
Everything above answers one question: when does a candle end? There are two popular chart types that answer a different one — what gets drawn at all — and they belong in a separate category because of it. Both are genuinely useful. Both delete information on purpose, which is the part that has to be said out loud.
Renko
A Renko chart is made of bricks of a fixed size. Nothing is drawn until price has moved one full brick beyond the last one; then a brick appears. If price moves half a brick and comes back, nothing is recorded at all.
Time disappears from the horizontal axis entirely — more completely than on a volume chart, where at least each bar represents a measured amount of trading. On a Renko chart, ten bricks might be ten seconds or ten hours.
What it is good at is obvious the first time you see one: trends are extraordinarily clean, because every wobble smaller than a brick has been erased. What it costs is two things, and the second is the one people discover late:
- The clean trend is clean because the noise was deleted, not because it was absent. Both charts are of the same market and one of them is hiding what the other shows.
- The chart is, by construction, behind. Price can travel almost a full brick without a single thing changing on screen. On a large brick size that is a meaningful distance of silence, and it is silence you are paying for in real money if you are using the chart to act.
Brick size is also a parameter with the same problem as bar settings above: it is not comparable between platforms, and the whole character of the chart changes with it.
Heikin Ashi
The name is Japanese for «average bar», and the name is the whole explanation. Each candle is not the market's open, high, low and close. It is computed:
- The close is the average of that bar's own open, high, low and close.
- The open is the average of the previous Heikin Ashi candle's open and close.
That second line is the important one. Every candle contains the one before it, which contains the one before that. This is a moving average wearing candles — and it inherits everything that implies, including the lag described on the page about trend indicators.
It is very good at one job: long runs of same-coloured candles make a trend readable at a glance, and short-lived counter-moves stop shouting. For deciding «is this thing still going», it does that better than a plain candle chart.
And the part that must not be skipped: the prices on a Heikin Ashi candle are not prices that traded. Its open and close are calculated numbers. You cannot be filled at them, a stop placed by them is placed by an average, and the real high and low of the session are somewhere else. It is a way of seeing, never a source of levels.
One last note that ties back to the section above: Renko needs the trade stream in the same way volume, tick and range bars do, because a brick completes on a price being reached rather than on a clock. Heikin Ashi does not — it is computed from bars you already have, whatever those bars are. So it can be laid on top of any of the four sampling choices, and it will inherit that choice's character.
What to actually do
Start on time bars, because everyone else is there and because the rest of this path is easier to follow when your screen matches the examples. Learn what the default is doing to your attention — that is what diagram 1 is for.
Change only when you can say what the change is for. «It looks cleaner» is not a reason; «I want each bar to represent a comparable amount of trading, because I am reading activity rather than schedule» is. And whichever you choose, check first that your data can actually support it.
The next article stays with a single candle and asks a smaller question with a more uncomfortable answer: what does one of these actually tell you, and what does it hide?