Understanding OHLC Prices: What Open, High, Low, and Close Cannot Tell You
OHLC prices compress a trading session into four numbers. Understand close-to-close versus intraday returns, extended-hours price differences, and the paths hidden within identical candles.
Open, high, low, and close summarize the starting, highest, lowest, and ending prices within a specified trading interval. Those four numbers alone do not reveal whether the high or low occurred first or whether sufficient quantity could be traded at those prices.
Define the trading day first
A daily candle covering only the regular session can have different highs and lows from a chart including extended-hours trading, even for the same stock and date. An exchange's official closing price also differs from the final after-hours execution price. The SEC explains that differences in how media report closing prices can cause confusion. When viewing U.S. stocks in a Korean app, also establish which market's calendar defines the trading date. Arbitrarily cutting data around Korean midnight and comparing it with an exchange's daily candle can misalign the coverage.
Close-to-close and open-to-close are different returns
Comparing today's close with the previous close includes overnight price changes. The change from today's open to today's close more closely describes movement within that day's regular session. A bullish candle does not necessarily mean a gain from the previous close, and a bearish candle does not necessarily mean the stock ended below the previous day. Calculate your actual trading return from your own execution price. Buying at the day's low and selling at its high is not an established executable strategy unless you check the order in which those prices occurred and whether trades could have filled.
Recognize what four compressed prices leave out
Two days with identical OHLC prices can expose investors to risks in a different order: one may plunge before recovering, while the other rises before retreating. Analysis requiring an intraday path needs minute-level prices and volume. Providers can also differ in how they incorporate price errors and corrected trades into charts. Align adjusted-price settings when comparing historical ranges. A long daily wick mainly establishes that a price was reached; it does not confirm a support or resistance level that will recur. After downloading OHLC data, first look for rows with a high below the open and close, or a low above both. Such values warrant checking for mixed session coverage or different handling of missing data and corrections. Rather than immediately deleting them, consult the original provider's definitions and distinguish days with no actual trading because of a halt from missing values.
Worked example
Hypothetical example: Suppose the previous close was KRW 10,000, and today's open is KRW 9,000, high KRW 9,800, low KRW 8,900, and close KRW 9,600. The open-to-close return is approximately 6.67%, but the return from the previous close is -4%. Even when the close is above the open, the value of a position held from the previous day can fall. If you bought at KRW 9,500, your return before costs would be approximately 1.05%.
What to check
- Does the data cover the regular session or extended hours?
- Is the comparison based on the previous close or today's open?
- Have you checked whether the high or low occurred first?
Sources and primary materials
This is educational material about research methods. For an actual company decision, verify the filings and primary sources for the relevant period.