Hi, I just got started with trading and am confused about why the open and close are so different from the variation in price over a given range. The open and close give the candle stick its body size based on which a lot of people call it different names. But what makes those two instants so different from the normal price variation like in a bar chart?
Nothing. Standard candlesticks and OHLC bars display exactly the same information (i.e. the open, high, low and close for a specified duration of time, ticks or volume, depending on how you set them up); all that's different is that candlesticks visually emphasize the opens and closes whereas bars visually emphasize the highs and lows. "You pays your money and you takes your choice". You don't have to use either, if you don't want to: there are other options available too (e.g. Renko, Heiken Ashi, Point & Figure, etc.). (For myself, I have a strong preference for OHLC bars over standard candles, because I regard the highs and lows as more objective and S/R-based, whereas I regard the opens and closes as more subjective and user-defined, but my choice of one over the other is just a personal preference about the visual emphasis of the display - the factual information presented by each of those two display-options is exactly the same. It isn't, though, with the other options I've mentioned above).
You could argue they're unimportant, but allow the candle to parse the day's relative movement. You could also say they model the least (open) and most (close) liquid trading on a typical day. You could say they're arbitrary but useful, or that they're definitive in trade signals. There's not really a right answer, and they have different useful qualities to different traders. At the end of the day though, all charting comes down to conveying the most useful information in the most readable way. You need to figure out what's useful to you.
What about a market that operates 24x7. How would the open and close prices be decided? I understand candlesticks make sense if the open refers to the open price and close the close price. So a period of 12hours makes sense. However what about shorter periods? How does it reflect the sentiments?
You need to keep in mind the difference in the circumstances that establish the prices at the open and close verses that of the high and low and which has the bigger effect on the trend. That, of course, would be the high and low. You may find it interesting to learn that while most of the printed charts in Japan, where candlestick charts originated, are still candlestick charts, candlestick analysis has been dead for years here in Japan. Just being new and exotic must have sparked the interest in the west.
Could you take a look at the question I posted before this? I am confused about the opening and closing prices on a interval lesser than that of the open and close of the market. Ex: Forex operates without closing, so whats the point of the open and close prices?
The opening and closing are for each bar... not as important as the hi/low of that intraday bar... not as important as the hi/low of daily bar.