- March 22, 2012
- Posted by: NetPicks
- Categories: Trading Article, Trading Tutorials
We have many customers and we encourage everyone to share their ideas and experiences so that we can share with others. This is what leads me to our discussion today on Kase bars.
What are Kase Bars?
We need to educate you on Kase bars and how they differ from Range bars.
Basically, Kase bars are very similar to Range bars, except they have a true range that is based only upon real price data. It takes into account gaps between the bar close and the current high or low of the bar. So, not all bars will be equal.
The True Range is equal to the maximum of the:
- High minus the low
- High minus the previous close
- Previous Close minus the low
What are the Benefits?
One of the benefits of a true range bar is that you can see breakaways, measuring or midpoint or exhaustion gaps, and other candlestick formations like island reversals. If you are running automation or strategies you will have greater reliability and accuracy since the orders generated come from actual price action and orders that actually happened in the markets.
Also, since you are charting True Range, you can use an ATR (Average True Range) on a regular time based chart and determine the best True Range or Kase bar value to use.
So, think of it like this; if you know a good ATR of a market, you now know the very best Kase bar to trade off of and get the best picture of market for trading.
Take a look at these pictures of the TF on a Kase Bar .6 True Range and a .6 Range bar chart. Notice that some of the bars are longer or shorter than each other on the Kase bar. That is because it takes real price action and does not fill gaps.
So, there is less volatility in the charting and therefore smoother charts.
There is no chop zone up/down in the middle of the chart above like the one below. Instead you see a smoother chart and it picked up the overbought market that the Range bar chart missed… giving a double win!
How to Use Kase Bars: Wheat Trade Plan
Here is Benjamin’s Research and Plan (we all owe him at heart felt thanks and appreciation for sharing this with others)…
Here is a Wheat Kase Bar trade plan.
If you are not familiar with Kase bars:
- They are very similar to range except they print with a tick difference from close to open.
- They tend to stay with the trend more and not get knocked around in chop as much, and they definitely take some getting used to as to their cadence.
This is a very simple trading plan that calls for a max 1 loss per day or 1 winner as long as it totals 8 ticks or more otherwise it will take another trade until it reaches its tick goal or gets stopped.
It has 3 targets, 2 money management and a fixed target, no trailers.
Here are the results.
Now for the Strategy Performance Report
That was done with our Auto Trade Back Testing Software. It can help you test new ideas or maybe even a slightly different Kase size (the sky’s the limit!).