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Old 01-23-2011, 06:17 PM   #1 (permalink)
 
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Range Bars


I. An Introduction to Range Bars

I am going to make an attempt to create a lesson on Range Bars to give back a little of what Informormedtrades.com has given to me. I hope this course is not a disapointment and can answer some questions that someone may have about the subject.

I will start here with the definition and where Range Bars Charting came from. Then every day I will contribute untile the course is completed,I promise not to draw this out and bore you all to death.

RANGE BARS (the definition): Range Bars sometimes called Momentum bars or Constant range bars. The bars look like a standard chart with an open, high, low, close and volume. The high-low range of each bar is constant. A new bar does not start until a price tick or pip is received that would exceed the fixed range of the current bar.

Characteristics of Range Bars:

1. Each bar is the same height because the range is constant.
2. The close of a bar is always at the high or low of the bar.
3. The open of a bar is always one tick or pip below or above the close of the preceding bar.
4. The time period covered by each bar varies since time is irrelevant to range bars.
5. All gaps are filled with inserted phantom bars.

RANGE BARS ( the creation ): Range Bars were created by Vicente M. Nicolellis Jr., a Brazilian broker and trader in 1995 (so range bars are a very new concept). During the 13 years he spent running a trading desk in Sao Paulo, where local markets tend to be volatile, he wrestled with the problem of how to handle this volatility and its variability. Finally he concluded that the most promising approach would be to eliminate time from the equation, and just concentrate on price action.

That is the conclusion of today's lesson. Hope this is helpful! Part 2 will be posted tomorrow.

Other Links To Help You Learn About Range Bars

In addition to the lessons below in this thread, InformedTraders can try the following links to learn more about range bars:

TradingFX Forex Range Bars Point & Figure Currency Strength Index
Range bars | Trade2Win Forums
An Introduction to Range Bars | Fibonacci Trader



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Old 01-23-2011, 10:14 PM   #2 (permalink)
 
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II. Comparing Range Bar Charts with Time Charts


The two chart above are a comparison between a Range Bar Chart on the left and a 3 Minite Time Chart on the right. The highlighted rectangled areas display the same price action on each chart for comparision. The red horizonal line are price referance lines.

The Range Bar Chart to the left is a 10 range bar chart of Crude Oil (CL) so each bar has 10 tick in its range. Notice each and every bar is the same height. A new bar does not open or close until it completes it 10 ticks or what ever range you choose to use.

You now can start to see the differance between price action in a Range Bar Chart and price action in the standard 3 Minite Time Chart.

In upcoming lessons we will take these charts and other examples and show the advantages to using Range Bar Charts.

This completes Lesson 2. Thanks for stopping by!
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Old 01-24-2011, 01:58 AM   #3 (permalink)
 
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III. Advantages of Range Bar Charts, Part I

In the upcoming lessons we will take the advantages of range bars and create exaples on my charts to explain there benefits. I will be using Crude Oil Charts (CL) with a 10 to 20 range bar setting to display these examples.

Range Bar Chart advantages:

1. Smoothing out price action and eliminating market noise.


As you can see in the examples above the range bar chart to the left has smoothed out the price action eliminating most if not all the noise in the entire day. Now look at the time chart price action it is all over the place especially in the after noon hours.

Range bar charts smooth out and eliminate noise because that are purely based on price action and not on time . Time is irrelevant in range bars. When you put time in the equation you end up with the chart on the right (choppy market noise).

We will continue with the advantages of range bars in the next lesson.

This completes Lesson 3. Thanks for stopping by!
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Old 01-24-2011, 09:41 AM   #4 (permalink)
 
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STL, thanks so much for doing this. I wait for more with bated breath. Also, I am having a heck of time finding out how to access range bars for forex. Anyone have any suggestions?
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Old 01-24-2011, 10:37 AM   #5 (permalink)
 
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IV. Advantages of Range Bar Charts, Part II

In this Lesson we will continue to give examples of the advantages of Range Bars.

Range Bar Chart advantages:

2. Defining clear support levels.


In the example of the range bar chart on the left we have clearly difined a support level @ 89.25 . Not only have we been given a support level but it has been confirmed at three different points in the price action making this a level of support that can be trusted and have a high probability of success to trade off of.

Notice the time chart to the right, this is the very same price action as the range bar chart to the left but the support is really unclear and you see an undecisive market.

Range Bar Chart advantage:

3. Defining clear resistance levels.


In the example of the range bar chart to the left we have clearly defined a resistance level @ 91.69 and it has again been confirmed and test three times before price action made its desent. As you can see this was a consoildation period notice how less bars were printed on the range bar chart than the time chart? This eliminates a lot of unnecessary noise and confusion. ( The highlighted price action in the range bar chart is the same highlighted price action in the time chart.)

Now lets look at the time chart, the 91.69 resistance level is not represented in the time chart to the right. Now look at the amount of bars printed in the consolidation period that was avoided in the range bar chart, can you see the difference in the noise and confusion?

To conclude this lesson I want to point out how you can use a range bar chart to establish clear support and resistance levels that can be missed using a time chart. Also how in times of consolidation we can avoid confusion and noise using range bar chart.

This completes Lesson 4. Thanks for stopping by!
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Old 01-24-2011, 10:57 AM   #6 (permalink)
 
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Quote:
Originally Posted by morgandallen View Post
STL, thanks so much for doing this. I wait for more with bated breath. Also, I am having a heck of time finding out how to access range bars for forex. Anyone have any suggestions?
Im not a forex trader but maybe this will help? Simit should be able to answer this question.

Range bar charts indicator for mt4 - Forex Trading | MetaTrader Indicators and Expert Advisors
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Old 01-24-2011, 02:49 PM   #7 (permalink)
 
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V. Advantages of Range Bar Charts, Part III

In this lesson we will continue the examples of the advantages of range bar charts.

Range Bar Charts advantages:

4. Eliminate the lag time in indicators! ( Say what? Is that posible? You be the judge.)


In this example on the left we are using a simple volume indicator up and down. Look how the volume indicator and the price action in the range bar chart compliment each other and eliminates the lag time allowing traders to take advantage of price action and giving traders more trading opportunities.

Now lets take a look at the time chart on the right. ( The highlighted areas in each chart repersent the same price action.) Notice how you didnt get a volume spike untile the up bar closed? So because of the time chart closes and opens a new bar every 15 minites you just missed that entire trade opportunity. There for your volume indicator was lagging.

Range Bars and Volume are very powerful together. You can develope an entire trading strategy using nothing but Range Bars and a volume up and down indicator!


Above is an example of stochastics on a range bar chart and a time chart using the same price action.


Above is an example of the MACD on a range bar chart and a time chart using the same price action.


This completes lesson 5. Thanks for stopping by.
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Old 01-24-2011, 05:42 PM   #8 (permalink)
 
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Nice work!!! Surprisingly so with the indicators.



Please continue...
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Old 01-24-2011, 06:06 PM   #9 (permalink)
 
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Quote:
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Nice work!!! Surprisingly so with the indicators.



Please continue...
Thanks, that means a lot comming from you magic, since you were the one that sent me on my volume quest! Your course encouraged me to put volume in my trading strategy and opened my eyes to price action.
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Old 01-24-2011, 08:32 PM   #10 (permalink)
 
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VI: Price Action Channels in Range Bar Charts

In this lesson we will discuss price action channels using range bar charts.

Range Bar Charts advantages:

5. Simplifying price action.


In this example we show a very simple parallel up trendlines they have created a price action channel. Once price action breaks below the channel price action starts its descent downward. Notice the down bar at the top of the channel is a high volume bar. Also as price action gets to the bottom of the channel buyers try to come back in, but notice there no volume behind the buyers so they fail. Then price action breaks through bottom channel and volume starts increasing as more sellers enter the market.

Now lets look at the same price action on a 5 minute chart. I have highlighted the price action on each chart. Price action is more complicated, harder to read, and harder to establish price action channels.

To conclude this lesson the range bars tend to simplify price action making it easier for the trader to identify trading opportunities.

This completes lesson 6. Thanks for stopping by.
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