for the Metatrader4 or Metatrader 5 trading platform
What are range bars and why should you use them?
Range bars are a new method of charting – a computerized version of a concept first introduced in 1995 by a Brazilian trader named Vicente M. Nicolellis Jr. They were designed for better analysis of the market and have proven to be particularly good for clarifying market movements by consolidating periods of congestion, otherwise known as ranging periods, into a few or even a single bar.
This makes it extremely easy to draw trend lines, obtain smoother indicator readings and utilize various pattern analysis. The key to success is eliminating constant “market noise” which consequently clouds trade signals. This is something that many traders understand all too well and range bars help show the “real picture” of what the price is actually doing. It does not matter what indicators you use. With range bars they will be more responsive, give clear patterns and improve trading altogether.
Range bars provide the edge you have been searching for.
The greatest edge offered by of range bars is presenting market information which is free of clutter, noise and directly relevant to trading. When using a standard time-based technical signal, your trade will always be late by definition because the price footprint must first occur before you can actually see it. With range bars, this is not the case.
So what exactly is a range bar?
A range bar is basically a bar that has the same price span (i.e. range) measuring from high to low and each bar closes either at the high or the low, regardless of where it has opened. Every time the price of the analyzed instrument moves up or down by a defined size (the range of a range bar), this bar is completed and a new one begins.
Time has no meaning here so a single bar can last somewhere from a few seconds during fast moves to a few days during long periods of consolidation when the markets are moving mainly sideways or are very flat.
The reason why range bars are so highly valued by technical traders is that unlike time-based candles, a range bar is the actual price parameter a currency has established over an undefined amount of time. Thus a break above or below the range is instantly treated as a price expansion.
How are range bars traded?
The most common and widely used trading method using range bars is based on price action pattern identification. Certain breakout and reversal patterns can be easily spotted on range bar charts and therefore the trader is able to plan out his entry & exit points with high precision, using very thigh stops. You can learn more about these patterns here.
How to determine the range bar setting?
This is something You as a trader can determine by observing how much price tends to move on the selected instrument. You can then set the range bar size accordingly. Another option which is more widely used and recommended by Investopedia is as follows:
“While we could apply the same range bar settings across the board, it is more helpful to determine an appropriate range setting for each trading instrument. One method for establishing suitable settings is to consider the trading instrument’s average daily range. This can be accomplished through observation or by utilizing indicators such as average true range (ATR) on a daily chart interval. Once the average daily range has been determined, a percentage of that range could be used to establish the desired price range for a range bar chart.”
The short video below will help you better understand this concept and how to apply it on the Metatrader4 platform.
How range bars work on MT4?
The professional RangeBars plug-in for the MT4 platform enables traders to leverage the concept of constant range bars in a live trading environment. It also offers precise and convenient backtesting methods.
When you attach the range bar indicator to a standard one minute time chart and define the desired range for a single bar, the plug-in will first create a historical range bar chart from all available history on the M1 anchor chart using the closest possible approximation algorithm. Next, the indicator will instantly start plotting live range bars in real-time and you will be able to add indicators, draw trend lines, mark price levels, apply standard MT4 templates and even run EAs directly on your custom range bar chart. You will be able to do exactly the same things as you can do on standard time-based charts in Metatrader.
The PRO version of the indicator is additionally shipped with a convenient script that lets you create precise range bar charts using data downloaded from tick data repositories and utilize range bar charts in MetaTrader’s standard backtester to test your EAs on range bar charts with 99% modeling quality*.
*) Backtesting procedure requires the PRO version of RangeBars plus a licensed version of Tick Data Suite or Tick Story.
The following video takes you through this process step by step.
Metatrader 4 RangeBars plug-in features
what you get...
Highly optimized C++ engine for range bars calculation. The plug-in remains stable even in very fast moving markets (i.e. during news releases).