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Forex Range Bar Charts
The Future of Charting is Here Today
Range Bars were first created in 1995 by a Brazilian broker and trader, Vicente M. Nicolellis Jr. While running a trading desk for more than a dozen years in Sao Paulo where local markets tended to be volatile, he wrestled with the problem of how to handle its volatility and variability. Vicente's solution was designing a new type of chart, the Range Bar chart.
A true Range Bar chart only builds new bars when the price covers a given and specific range (instead of just building candlesticks every 5 or 15 minutes etc), and then moves to the right just like normal chart to start building the next bar. Real Range Bar charting will not "paint" a new bar for long periods if price hasn't moved enough, and will not paint a small flat bar just to move forward because the clock is advancing. In other words, "time" has no effect on this type of chart.
Due to the fact that time has been removed from the TradingFX Range Bar Charts you can benefit from and gain a much cleaner, noise free charting display with every specific pip range study you select, regardless of the currency pair you are tracking. This means that all of the tall elongated bars from rapid price moves and all of the thin lifeless bars from slower price moves are gone, and you are instead provided with a very consistent pure price Range Bar charting display. Plus the typical candlestick chart tails and wicks are also greatly reduced, since a new Range Bar is only created after and each time the current pip range is filled, which gives much more significance to the small tails and wicks that do present themselves.
The charts below represent the same period of activity on the same pair. However you will notice how the Range Bars disassemble the tall elongated time-based candlesticks, tails and wicks created from rapid price moves and reassemble the very small candlesticks from slower price action. This allows every technical indicator, oscillator and study to respond properly, which improves their performance and reduces lag, while creating a superior and more consistent charting display. You should also look at how the TFXD oscillator is smoothed considerably by the Range Bars verses the MACD on the time-based chart. This is the same benefit and improved performance you will find with any indicator placed on the TradingFX Range Bar Charts.
Candlesticks made every 5 minutes Range Bars made every 8 pips of price movement
10 Candlesticks ~ 77 pips marked high to low 25 Range Bars ~ 77 pips marked high to low
Range Bars Disassemble Rapid Price and Consolidate Slower Price Moves
Vicente concluded that the most promising approach would be to eliminate TIME from the equation and only concentrate on PRICE. After all, it is price that you trade rather than time, unless you trade the options market. Essentially this refers back to the early days of technical analysis and the use of Point and Figure Charts that only recorded price changes and opened a new bar once that range was covered. You can also apply modern concepts of indicators, which are bar based. The resulting smoother charts makes it possible to adjust your indicator's periods by imputing a lower number to run more closely to the current price, effectively reducing lag from any technical study.
In 1996 the Range Bar concept was computerized, which meant that many more markets could be studied. Our experience and backtesting over time has shown that Range Bars are particularly good at focusing on and clarifying price movement. With Range Bars, long meandering horizontal "congestion" is condensed into a bar or two, concentrating attention on the essential underlying price movement while eliminating unnecessary chart "clutter" and "noise". This also makes the use of trend lines easier, and chart patterns more identifiable. Most chart noise can be removed by selecting the appropriate Pip Range Bar for the currency pair you're trading. Using a bar size slightly larger than the typical oscillations in the 1 to 5 minute charts as a guideline, you will be eliminating most of the noise that causes false signals, late decisions and poor trade entries.
Clear Entry and Exit Signals
The charts below represent the same period of market activity on the same currency pair. Once again you will notice how the Range Bars disassemble the tall elongated time-based candlesticks, tails and wicks created from rapid price moves and reassemble the very small candlesticks from slower price action. Plus you can again see how the TFXD oscillator is smoothed considerably by the Range Bars and provides more accurate display verses the MACD on the time-based chart. TradingFX Charts allow for a more precise charting strategy by eliminating the noise and enabling more accurate indications for entering and exiting trades.
Range bars made every 8 pips of prive movement Candlesticks made every 15 minutes
Both examples show the same pair and time frame with approximate price movement from and starting at:
77.80 up to 78.30 (+50) down to 77.35 (-95) up to 78.20 (+85) down to 77.10 (-110) up to the 77.40 range (+30)
The enlarged screen shots below are comparisons of the same rapid price move and time frame displayed with a 15 pip Range Bar chart verses a 5 minute chart. It is not only the difference you can instantly see, but also how the subtle change in using Range Bars dramatically affects the clarity of the corresponding price points that these charts plot.
15 pip Range Bar Chart 5 Minute Chart
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Notice the 7 green bars in the center of the big move displayed on the example to the left above verses the single tall candlestick covering the same price activity. Range Bars not only disassemble rapid price moves, but they also have a nice quality in that when a pair bursts and moves quickly in one direction or another, and price doesn't retrace far enough to close the bar, they end up "stacking" (15 pips tall) one column apart, or even with a vertical gap between them in very fast markets (exemplified between the 2nd and 3rd green bars from the top). Almost always, the highs and lows of each candlestick will overlap on a time-based chart, stacking the majority of the rapid price move on just a few or even a single elongated candle.
When comparing to a 15 minute chart the inherent flaws of a time-based charting becomes even more obvious. In fact the 15 minute chart is even more bunched up than the 5 minute version and looks more like a 3-bar whipsaw which of course is not easily traded or even viewed.
These examples clearly show some of the differences and benefits of using the TradingFX Range Bar Charts, plus explains a few of the reasons why many traders experience problems when trying to make decisions with charts that are based on time intervals and not pure price movement. What does time have to do with your charts and trade decisions, when as a trader what you really care about is what's happening to the price and the clarity of your chart displays?
Are you ready to learn how to use Range Bar charts in live market conditions? You will see a more accurate view of the currency pairs and their pure price movements using the TradingFX Charts. We maintain a 24 hour online trade room, moderating the major market sessions and news events, teaching specific strategies and offering hands-on guidance. TradingFX can help you become more consistent and trade with greater confidence, while improving your market behavior long term.