Weekly Tip #18
Trading Using Range Bar Charts
Range bar charts provide quite a different perspective in Technical Analysis when compared to tradition time-frame based charts. Each range bar depict a specified movement of price. In comparison, the commonly used candlestick/bar charts (such as the 5-minute chart), will always show the same number of bars during each trading day, regardless of volatility, volume or any other factor. Range Bars, on the other hand, can plot any number of bars during a trading day. During times of higher volatility, more bars will be plotted; conversely, during periods of lower volatility, fewer bars will plotted.
Range Bar charts are specifically useful when the market lacks direction, because they hide the noise (irrelevant small price movements). They are used by traders to identify market trend and to interpret volatility.
Defining a strategy for range bar charts is not easy because they lack time-frame. MasterTrader v8.0 allows you to plot range charts and apply any technical strategy on them similar to traditional candlestick charts. And of course, you can automate your strategy, to let your strategy manage all signals on your behalf.
Happy Trading!
AlgoTrading@Mastertrust
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