4 Reasons Why You Should be Trading with Range Bars

Range bars are bars that are plotted on a chart that have the same price increment, the same height, and each bar closes either at the high or the low, regardless of the opening price. There is no time component as you would see with candlestick charts or bar charts.

Range bars were brought to the markets in 1995 by a Brazilian broker and trader named Vicente M. Nicolellis, Jr.

If you want a range of 5 points on the Dow and you are trading with range bars, set your range to 5. Every time the Dow moves 5 points up or down in total for that bar, it will complete the current bar and start a new one.

Time has no effect.

 

Forex Range Bar Example – Clarity

This the NZDUSD Forex pair using both time based and range based charting.

Range Bars On Forex Chart
Range Bars On Forex Chart

We can clearly see the 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).

time based charts vs range
Time Based Charting

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

  1. Range bar charts removed the long tails we see at market bottom
  2. Clear areas of potential support and resistance zones
  3. More visually appealing chart

The issue with time based charting is that small movements of price, some call it noise, will print.  The range bar will only print after price had advanced or declined X range.

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.

 

Range Bars are available on Metatrader

It used to be that with Metatrader you only had the option of trading with time charts, but not anymore! You can now use range bar charts and reduce market debris such as long wicked whipsaw bars, stalls and consolidation. All of these can prevent traders from clearly seeing the market as it unfolds.

You’re probably thinking, “Wait! Everybody uses time-based charts” and you’re right, and that’s the problem. Replacing time-based indicators with range bars may very well replace your losses with profit.

 

Is There An Edge With Range Bar Charts?

The greatest edge of a range bar is that the information displayed is directly relevant to your trade. When using a time-based technical signal, your trade is late by definition. The price footprint must first occur before you see it. The range bar is valued by technicians because unlike a chronology-based signal, a range bar is the actual price parameter a currency has established over an undefined amount of time.

For example, an 10-pip range bar candlestick shows the trader a definitive trading range. A break above or below this range isn’t a “violation” but a price expansion. How does this help the trader? The signal accuracy available for a long or short trade using range bars is phenomenal, controlled, and emotionless.

 

Range Bar Strategies

If you trade the Forex market as a day trader and you seek to make 10 Pips on a trade wouldn’t it be more useful to pull up an 10 Pip range bar chart?

A 10 pip plot would ignore time and instead concentrate on price movement alone, and price is what ultimately matters.

day trading range bars
10 Range Bar – Day Trading Forex

Once the currency trade moves outside the 10 Pip range, another candlestick will form, no matter how many minutes or seconds this may take.

5 minute candlestick chart
5 Minute Candlesticks

For the trader accustomed to viewing time-based candlesticks, not to worry. The visual look of the range bar chart is similar as a time-based candlestick, but you may find a clarity you never thought possible.

For my money, the range bar chart allows a more objective view of turning points and pullbacks that you can trade.  You clearly pick up the trend in price action. On the time chart we would get into the trade and really not know if we were out of the chop. Not to mention we did not make as much.

If you are a trader that trades price ranges as part of their strategy, range bars highlights consolidations better than time based charts.

 

Conclusion

I find range bars highlights price movements in a more orderly fashion.  This will allow technical analysis traders to better view the price movements of the markets they trade.

You can better see pullbacks in price as well as trading ranges.  Those two aspects of every market make up the backbone of many successful trading strategies.

Give range bars a try and see if you can improve the results of your current trading strategy.

7 Responses to “4 Reasons Why You Should be Trading with Range Bars”

  1. Peter Simpson

    Hi everyone.
    I use a copy of your DST system for trading Forex and I find it very reliable. Is there any point in changing over to range bars as I use the MT4 platfor for trading. I am also using the DST system with daily charts to analyse the trend of the indexes such as the US500, Nasdaq and the ASX200 I must compliment you on the article above on range bars, I found it extremely interesting.

    Reply
    • CoachShane

      Thanks Peter and happy you are having success with DST! Great news. My suggestion for range bars would be to test it out. Indicators will plot differently with range so ensure you factor that in during your testing.

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

* :

* :

* :

:

This site uses Akismet to reduce spam. Learn how your comment data is processed.