Representation Bias

That daily bar chart is a good example of the first heuristic, which everyone uses, called the "law of representation." What it means is that people assume that when something is supposed to represent something, it really is what it is supposed to represent. Thus, most of us just look at the daily bar and accept that it represents a days worth of trading . . . . in reality, it's just a line on a piece of paper - no more no less. I might add that depending on which source of data you receive, the bar can be correct or incorrect. Many times, I've looked at a daily bar that was very long only to discover that a bad tick occurred at some extreme end of the price distribution, which the data provider didn't correct. This error resulted in a bar that was incorrect. Why is this important? Because many indicators use the range of prices of the day to represent something, ie and moving average.