How Range Bars Can Refine Your Trading Approach

Range bars changed how traders view market movements by stripping away time-based constraints that often hide true price action. Unlike traditional charts that create new bars at fixed time intervals, range bars form only when price moves a specified amount, revealing the market’s natural rhythm and momentum.

These charts cut through market noise by standardizing the size of each bar, making patterns and trends more distinctive and actionable. While candlestick charts can produce irregular, difficult-to-interpret formations during choppy periods, range bars maintain consistent visual dimensions that highlight genuine price movements rather than time-based distortions.

What are Range Bars and How Do They Work?

Range bars are a type of chart that displays price action across various financial instruments including stocks, currencies, and commodities. They filter out short-term price movement noise, giving traders a clearer picture of market activity.

Unlike traditional candlestick charts that plot based on time, range bar charts plot based on price movement, which helps eliminate market noise. A range bar forms when an asset’s price moves a predetermined amount or “range” in a specific direction, and new bars appear only when this range is met.

The size of the range that is required before plotting a new bar, is determined by the trader and varies depending on the instrument being traded.

For example, if a trader sets a specified range of 10 points for stock TSLA, a new range bar will be formed each time the price of the stock moves up or down by 10 points. If the price moves up by 20 points, two range bars will be formed, each with a range of 10 points.

Benefits of Trading with Range Bars

Range bars offer traders a significant advantage by making it easier to identify trends and patterns, as they eliminate much of the noise and volatility typically found in traditional candlestick charts.

By providing a clearer view of support and resistance levels, range bars help traders make more informed decisions, particularly when identifying potential breakouts and reversals.

Range Bar Chart VS Candlestick Chart – Clarity In Price

This is the EURJPY Forex pair using both time-based and range-based charting using Tradingview platform during the same period. This platform defaults to using bars instead of candlesticks.

We can see that price movements have created easy-to-spot turning points in the market. Zones that have and could act as support and resistance are easy to spot.

Let’s contrast that with a time-based chart (daily) when Forex trading.

What can we see on the range chart when comparing these two charts?

+ The long tails on the price bars are removed

+ The areas of support and resistance zones are clear

+ More visually appealing

Having a specified price range uses only price to plot a single bar instead of the passing of time. Range bars help show you the picture of what price is doing. It does not matter what trading indicators you use, they will respond much faster and give a clear pattern to improve your trading.

Is There An Edge With Day Trading Range Bar Charts?

Day trading with range bar charts offers no guaranteed edge, just like any other trading strategy or tool. However, some traders find these charts more advantageous than other types for day trading purposes.

• Range bar charts help traders filter out market noise and concentrate on meaningful price movements.
• This noise reduction makes trend identification and spotting trading opportunities easier.
• Traders can customize the price range for each bar to match their trading style and adapt to market volatility.
• Range bar charts are particularly useful in volatile markets or during high-volatility periods.
• Unlike traditional time-based charts that use fixed time intervals, range bars adjust dynamically to current price movements.
• Range bar charts assist traders in identifying important support and resistance levels, which inform trading decisions.
• They also help detect breakouts or trend reversals, as significant price movements beyond the range bars may signal shifts in market sentiment.

Range bar charts improve trading by filtering market noise and highlighting significant price movements, which makes trends and trading signals easier to identify. These charts adapt automatically to price volatility, enabling traders to better recognize key support and resistance levels while spotting breakouts and reversals more effectively than conventional time-based charts.

Range Bar Strategy For Crypto

The key to successful range bar trading starts with choosing the right bar size that aligns with Bitcoin’s natural volatility and your trading timeframe. For Bitcoin trading, a range of 100 to 500 points ($100 to $500 price movements) typically offers an effective balance, though you should adjust this based on current market conditions.

Since markets have different volatility levels, you must customize the range size to match each asset’s characteristics and your chosen trading approach, whether it’s intraday, swing, or position trading.

A simple approach is trading pullbacks in uptrends or selling the rallies in a downtrend. Virtually any trading strategy you use with time based charts apply to range bar charts.

On this 100 range chart of BTCUSD, price hits a previous resistance zone and begins to decline. The MACD indicator at the bottom of the chart is showing bearish momentum. You will want to see price put in a small rally and then look to trade the break of the lower trendline (for shorts).

This pullback and rally approach works particularly well in Bitcoin’s trending markets because range bars eliminate the time-based noise that often triggers false entries. By focusing on buying weakness in uptrends and selling strength in downtrends, traders position themselves with the current market direction while achieving better risk-reward ratios than chasing breakouts.

Range Bar Strategy For Forex

If you trade the Forex market as a day trader and you look to make 10 Pips per trade wouldn’t it be more useful to pull up a 10 Pip range bar chart? A 10-pip plot would ignore time and instead concentrate on price movement, and the price is what ultimately matters.

In this example, a trader can identify a double bottom pattern by drawing a downtrend line on the price chart. When looking to enter a long trade, the trader waits for confirmation as the price closes above the downtrend line, indicating a 10-pip upward movement and reversal.

If the current bar closes at its high, a trader would close the trade for profit.

Once the currency moves outside the 10 pip range and the range bar closes, another bar will form, no matter how many minutes or seconds this may take.

This chart is using a 50-pip range bar setting.

The 20 simple moving average is showing us the general trade direction and we can use it as a zone to monitor for pullbacks to move into.

Price had broken a previous support area and confirmed our downtrend. We will be looking for a rally to around the moving average that also coincides with a previous support zone.

The smaller chart shows that we need two obvious points to draw our upsloping trend line on the rally. These are complex pullbacks and have the benefit of trapping some traders to the long side.

The range bar chart allows a more objective view of turning points and pullbacks that you can trade. You can pick up the trend in price movement easier because we are not seeing extreme shadows on the upper or lower parts of the range.

If you are a trader that trades price ranges as part of their strategy, range bars highlight consolidations better than time-based charts because you are looking at the same price increment.

Range Bars Trading Strategy In Stocks

Range bar trading strategy in stocks is a great way to take advantage of the stock market’s quick movements. By utilizing range bars, traders can identify and capitalize on short-term trends that may be missed by traditional time-based charts.

Range bar trading can help traders filter out market noise and focus on significant price movements, making it easier to identify trends and potential trading opportunities.

Range bars provide various applications that adapt to different trading styles and preferences. A commonly used strategy involves watching for breakouts from range bar patterns or support and resistance levels.

For example, when a stock consolidates near a specific price level for several days, traders often look for breakouts above or below the range bar, which may signal shifts in market sentiment.

On this stock chart, the price breaks over resistance and sets up a pullback in price. The 15-minute chart on the left shows an increase in market volatility with the pullback being a spike in price.

The $.50 range bar chart shows bars printed in an orderly manner allowing the drawing of a trend line. A trader can enter when a new range bar opens above the trend line showing a reversal from the downward movement in price.

Price also has a pullback to the trend line once it has broken above. Traders could enter when the price resumes the upside move.

What Range Setting Should You Use?

The range to use is a personal choice and can vary depending on the instrument being traded, individual preferences, and market conditions.

Traders should consider factors such as the volatility of the asset being traded, the time frame they are trading on, and their overall trading strategy.

One approach is to calculate the average true range (ATR) of the instrument and use this as a starting point for determining the range. The ATR is a measure of volatility and can be an excellent way to decide the range. If a trader wants fewer bars or more bars, it is easy to adjust the ATR period setting to a shorter or longer period.

When choosing the right size for range bars, traders need to align it with their trading approach. Swing traders typically work with larger range bars, while day traders and scalpers tend to use smaller ones.

Finding the ideal range for range bars requires experimentation and practice. Traders should test different ranges based on price activity and monitor their performance across various market conditions, making adjustments as necessary.

Pros And Cons Of A Range Bar Strategy

The range bar trading strategy comes with both advantages and disadvantages that traders should carefully evaluate before implementing in live market conditions. The pros and cons of range bar strategy require thorough assessment for effective trading decisions.

Pros:

1. Clarity: Range bars can make price movements clearer by eliminating the noise caused by small price fluctuations. This allows traders to focus on the overall trend of the market.
2. More efficient: With range bars, traders can potentially trade more efficiently because they can identify trends more quickly and easily.
3. Better risk management: Range bars allow traders to set stop-loss orders more accurately, which can help minimize losses.

Cons:

1. Less data: Because range bars only show price movements within a specific price range, they may not provide as much data as traditional candlestick charts, which can make it more difficult to identify important patterns.
2. Limited use: Range bars are not suitable for all trading situations, and traders should use other chart types in conjunction with range bars to get a complete picture of market trends.
3. Requires experience: Trading with range bars requires some experience and knowledge of market trends, so it may not be suitable for novice traders.

Summary

Range bar strategies can be valuable tools for traders looking to make smarter market decisions. Despite their limitations, such as restricted data availability and the need for trading experience, range bars can offer a clearer view of market trends and improve risk management.

Your trading style and goals will determine how you use range bar strategies. Before incorporating this approach into your trading plan, it’s essential to evaluate its pros and cons carefully. Range bars can be useful trading tools whether you trade stocks or foreign exchange.

If you decide to implement range bars, stay disciplined and keep track of market trends to make well-informed decisions. When properly used, a range bar strategy can enhance your trading effectiveness and success over time.