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RANGE CHARTS
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Created: by joyginy Attachments:0

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RANGE CHARTS

  #11 (permalink)
Member
jodhpur
 
Futures Experience: Intermediate
Platform: ninja and esignal
Broker/Data: esignal
Favorite Futures: oil,gold
 
joyginy's Avatar
 
Posts: 31 since Nov 2009
Thanks: 0 given, 14 received

Well yesterday i was watching eotpro vedio on youtube where Bill Dennis said that he uses range charts for trading as it filters out lot of noise.Today i got intrested in range charts and from morning i am trading gold with range charts and also i have stack up my usual tick charts and i have to say that indeed it filters out lot of noise.

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  #12 (permalink)
Just starting out...
Vancouver, British Columbia Canada
 
Futures Experience: Intermediate
Platform: NinjaTrader, TradeStation
Favorite Futures: eminis NQ,ES and CL
 
Spiffydude's Avatar
 
Posts: 13 since Nov 2009
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Yea that is where I first heard about range charts... And so far I dont think I will trade with out them... They really do smooth things out in regards to price action. The one thing I had to get my head wrapped around was with range bars you need to remember that you maybe holding a position longer then you may be used to.

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  #13 (permalink)
Elite Member
Northern California
 
Futures Experience: Intermediate
Platform: Ninja Trader
Broker/Data: Amp Futures/ Zen-Fire
Favorite Futures: YM and CL
 
Jeff Castille's Avatar
 
Posts: 2,119 since Jun 2009
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Interesting article....FxBd


Forex By Design - You've NEVER seen FOREX like this before!

Breaking the Trading Rules Ė and Winning
It has been said that those best at breaking the rules, have first mastered the rules. This is so true in trading as to be frightening. The trappings of trading can beÖwell, rather trapping. Charts, market analysis, risk management approaches, and ill-calibrated indicators can create the "noise" traders always blame on someone else. After years of trading and learning all the rules, Iíve gone from using 10 indicators on 3 screens to 3 indicators on 1 screen, and one of these indicators may surprise you.
I am a Forex trader. The liquidity and flexible hours fit me well. Previously, I traded stocks and options. When entering the Forex market I simply took my same charts, same indicators and typed in currency symbols thinking a signal was a signal no matter the instrument. How funny is that? Very.
Burning the Candlesticks
My original charts contained several indicators, but one I considered staple. My 5-minute candlestick chart. For years, I watched the market clock with unblinking concentration. Now? I break these rules daily. That 5 min candlestick? Havenít used it once in the last 2 years. My most profitable years? The last two. Iíve replaced this time-based indicator with Range Bar based indicators. Breaking the "rules" can work well.
Over the years, many other traders have developed an almost infinite number of trading strategies. However, almost all of these strategies are based on the principle of time. Reversals, continuation of a trend and imbalances are all fundamentally hinged to an element of chronology. Yet, during a summer when I was fortunate enough to visit a very successful trading desk, I noticed something. The only indicator of time was the clock on the wall. All indicators on their screens were price range based. This challenged my old thinkingÖand my old thinking lost.
Most of the software I viewed on the desk was propriety and built in-house. Consequently, I searched and found very few vendors, with the exception of a boutique company called Forex By Design, offering a dynamic, intraday range bar charting package. Go figure.
Crazy Logic
Lunacy, by definition, has no logic. This is disturbing, as I am very logical, but a review of my old trading methods indicated I routinely flirted withÖ well, lunacy. Range bars are infinitely logical. On the other hand, time-based indicators, in reality, have little trading value. The only thing that matters is price. Entry and exit prices represent actual money won or lost. This thought in and of itself is so obvious; I am rather embarrassed to acknowledge it this late in the game.
Range bars are the second cousin to Point/Figure and Renko charts, they were created by Vicente M. Nicolellis Jr., a broker who traded the extremely volatile Brazilian markets. His creation works by plotting a bar on a chart using a pre-determined price/PIP range. For example, if you are a swing currency trader, you may only want to see a bar every time a certain currency pair moves your chosen range. Conversely, if you are a short-term trader you may want to see a bar every time the pair has moved 5 PIPS. The beautiful thing is this, range bars ignore time and only concentrate on pre-defined price parameters. What a maverick idea.
We Make Our Own Noise
Here is a clarifying example, using a range bar of 5 PIPS. Letís say a trader is viewing a currency pair. Letís say this pair moves from 1.5441, to 1.5442, to 1.5445 and then to 1.5446 over a period of 35 minutes. Only one bar would have closed during that time on a range bar chart. This one range bar would read a minimum of 1.5441 to maximum of 1.5445. A 5-minute chart would have generated 7 bars, one for each 5-minute interval of the 35-minute duration. That is what you call noise.
Continuing the range bar example, there will be a second bar opened at 1.545, but not closed. This new bar must now have a 5 PIP range to close. Letís say the currency goes back to 1.542 and then up to 1.546 over the next minute, a new bar will be plotted, since there is a 5 PIP range, even though only a minute has elapsed Ė time is irrelevant with range bars, the bars are only plotted after the range has been met. Since time is irrelevant when using range bars, they assist the trader by reducing noise in the chart, allowing trends to become more visible.
To summarize, range bars:
  • Make the underlying trend more visible,
  • Reduce the volatility and self-induced noise,
  • Allow traders to participate longer in the underlying trend,
  • Better identify support & resistance lines, buy/sell signals, and trendlines
  • Remove gaps
Itís not a bad idea to challenge what you are used to. Breaking your own rules can be very revealing.

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  #14 (permalink)
Elite Member
Northern California
 
Futures Experience: Intermediate
Platform: Ninja Trader
Broker/Data: Amp Futures/ Zen-Fire
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Jeff Castille's Avatar
 
Posts: 2,119 since Jun 2009
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You'll notice in the above article that this trader had the exact opposite experience as Big Mike. He went from a 5 minute chart to range bars and became more profitable.

So what can we conclude? Well......whatever works for you is GOOD.

I do believe, as Big Mike pointed out, that using range bars on too small of a setting is a bad idea. However.......I also believe using range bars on a larger setting is a very good idea.....especially if you use any indicators......as minute charts distort the indicators just like tick charts.

It's all what you get used to.

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  #15 (permalink)
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jodhpur
 
Futures Experience: Intermediate
Platform: ninja and esignal
Broker/Data: esignal
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joyginy's Avatar
 
Posts: 31 since Nov 2009
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quite informative article jeff, and thanks spiffy for sharing your experience.I also think that i should include range charts in my trading.

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  #16 (permalink)
Elite Member
Northern California
 
Futures Experience: Intermediate
Platform: Ninja Trader
Broker/Data: Amp Futures/ Zen-Fire
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Jeff Castille's Avatar
 
Posts: 2,119 since Jun 2009
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View of the Market


joyginy View Post
quite informative article jeff, and thanks spiffy for sharing your experience.I also think that i should include range charts in my trading.

It's a personal choice......I'm not pushing it.......use what makes sense to YOU.

Range bars are a relatively new concept. (developed in the 1990's) many very successful traders haven't even heard of range bars. You may remember when TRO was involved here at Big Mikes that he didn't even know what range bars were. Yet he seemed to be taking money out of the market on a consistant basis. When I was involved at LBR and inquired why they didn't use range bars.....Damon (Pocketman) simply told me "if it ain't broke why fix it" He already knew how to make money in the market with minute and tick charts so he wasn't even interested in looking at range bars.

At the end of the day.....you are the one who is going to have to figure out how to trade and you are the one who is going to have to decide your view of the market.

Although I prefer range bars.......I still keep a 5 minute chart up.......it's nice to know what the competition is looking at.

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  #17 (permalink)
Member
jodhpur
 
Futures Experience: Intermediate
Platform: ninja and esignal
Broker/Data: esignal
Favorite Futures: oil,gold
 
joyginy's Avatar
 
Posts: 31 since Nov 2009
Thanks: 0 given, 14 received

yes i too look for 5 min chart but only for daily,weekly and monthly pivots atr band, dialy weekly and monthly high and low.I use it mainly for exits rather then taking entry,as i find exits quite difficult through indicators.And i have to say that ppl do really obey pivots.

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  #18 (permalink)
Elite Member
Chiron
 
Futures Experience: None
Platform: ninjatrader
Broker/Data: Amp Futures/Zen-Fire
Favorite Futures: ES
 
Posts: 740 since Aug 2009
Thanks: 25 given, 152 received

try this exercise - use the range bars as momentum bars (as they were intended) and time charts as pattern finders - range bars are more precise as momentum than lets say stochastics

i.e. you get a good buy pattern on a ES 5min chart (triangle breakout or any such pattern) - then you look to see if your 2range chart of the ES with a triple ema thrown in (and have the color set to true) is blue - chances are you have buyers coming in for that breakout and you can grab some easy cash

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  #19 (permalink)
Elite Member
Chiron
 
Futures Experience: None
Platform: ninjatrader
Broker/Data: Amp Futures/Zen-Fire
Favorite Futures: ES
 
Posts: 740 since Aug 2009
Thanks: 25 given, 152 received

geez, stopped by to wish all a merry christmas and i see my name in red - whats next, a cross burning in my front yard? lol

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  #20 (permalink)
Just starting out...
San Diego, CA
 
Futures Experience: Advanced
Platform: NinjaTrader
Favorite Futures: forex
 
Posts: 7 since Sep 2009
Thanks: 2 given, 2 received


I actually started trading range bars due to Jeff. I am currently using a template found in the download section which only uses moving averages and line charts. I do have a candle chart without indicators but I found the line chart much easier for me to pull the trigger on a trade. And the range chart is perfect for this setup.

In fact the template is similar to a commercial indicator for the forex market. But I think it might work for any other market.

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