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Trading with altered price chart: P&F, Range Bar, Renko, Kagi, etc.

  • #21
  • Edited 8:16am Mar 29, 2013 6:39am | Edited 8:16am
These are some threads I found that discussed Range Bar charts, which apart from eliminating the time factor, does not distort price Highs and Lows and price swing points. If anyone know of other threads please share.

1. Katana Trading Strategy
2. Musashi Trading Journal Using Range Bars
3. Nexas's Intraday Range Bar Trading
4. Range Bar Trading with Nexas
5. Range Bar Charts Exposed - The Timing Solution
6. Constant Range Bar Charts Exposed
7. Samurai Trading - Elite Range Bar System

Quoting FerruFx
Quoting Ishtana
The subjective choice of box size. Why 8? Why 10? Why any other number?
This is the same question you have to ask yourself when you choose to trade M5 rather than H4.
If I may add a quote from an unrelated source. To answer Ishtana's question, the range bar trader could also use multiple timeframes analysis: 4pips Range Bar + 8pips Range Bar + 16pips Range Bar. That is, operate on 3 timeframes. The choice is not subjective if you think about it this way. Similarly, you could use 5mins +15mins + 60mins, or 15mins + 60mins + 4hrs, or 60mins + 4hrs + Daily.
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  • #22
  • Apr 30, 2013 3:18am Apr 30, 2013 3:18am
FXEZ told me I should be more of a quant. So...

I was willing to fit a Gaussian and a Cauchy distributions on a daily and a hourly return histograms. I wanted to see how better Cauchy fits the market compared to a Normal distribution. Actually I expected an alpha-Lévy or something like that but I hoped Cauchy could approach enough (as it is a special case). In fact a Cauchy is a really good approximation...

But that's not the reason why I'm posting here. That's because of the second step. I wanted to see if a range bar return histogram was more Gaussian-like or Cauchy-like. I was surprised by the result. The distribution is M-shaped.

On a time chart the most common move is "no move" (it peaks around zero) while on a range chart the most common move is "full range move" (two peaks at +R and -R). I wonder what this may imply in a trader's point of view...

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No greed. No fear. Just maths.
  • #23
  • Edited May 1, 2013 3:00am Apr 30, 2013 10:06pm | Edited May 1, 2013 3:00am
Quoting PipMeUp
On a time chart the most common move is "no move" (it peaks around zero) while on a range chart the most common move is "full range move" (two peaks at +R and -R). I wonder what this may imply in a trader's point of view... {image} {image}
It doesn't mean anything. On a regular time-based candlestick chart, the range of bars is theoretically "unlimited". You will measure bigger moves if interval is set to H4 than if you set to M15. On Range Bar charts, you manually set the pips range to construct the chart. So if set to 20pips, it will open a new bar once 20pips have been exceeded and close once the new bar moved 20pips. Of course the distribution will show the +20pips and -20pips bars as most common. It is artificially constructed that way.

Suppose price is at 1.2900. Due to some news it spiked up quickly to 1.2980 within 5mins. On a M5 chart, it just shows 1 green bar opening 1.2900 and ending 1.2980 and measuring +80pips. But on a RG5 (to use your notation), every 5pips will start a new range bar so there will be 16 successive green bars. But the average measurement of pip return will stay at fixed 5pips, because that's how the chart is constructed based on your RG5 setting. It really does not mean anything looking at individual bar distribution. The point is looking at price action without the interference of time element, when looking at range bar charts.

Does anyone have a freely available EA to construct "gapless" range bars? I wanted to match the display of TradeStation, but on MT4 the range bars had that 1pip gap between each new bar.

Quoting FXEZ
{quote} PipMeUp, that's a very interesting chart! It clearly has the appearance of being Bimodal and as such there may be a small insight that can be gained from studying the properties of similar distributions. The M shape appears to show two mirror image distributions, each with skew towards the center (zero mean). To properly work out the probabilities for each outcome would likely require splitting it into two distributions at zero and multiplying the left distribution...
I can't believe you guys are analysing the M shape distribution. Do you know how the range bars are constructed? If set to 20pips each bar will chop off exactly at 20pips and a new bar created. Every bar is constant range of 20pips. It's an artificially created chart with fixed range 20pips if set that way. The M shape distribution reflects that and there is no analysis to speak about.
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  • #24
  • May 1, 2013 1:31am May 1, 2013 1:31am
Quoting PipMeUp
The distribution is M-shaped. On a time chart the most common move is "no move" (it peaks around zero) while on a range chart the most common move is "full range move" (two peaks at +R and -R). I wonder what this may imply in a trader's point of view... {image} {image}
PipMeUp, that's a very interesting chart! It clearly has the appearance of being Bimodal and as such there may be a small insight that can be gained from studying the properties of similar distributions. The M shape appears to show two mirror image distributions, each with skew towards the center (zero mean). To properly work out the probabilities for each outcome would likely require splitting it into two distributions at zero and multiplying the left distribution by -1 to flip the mirror image. The mode of each distribution would clearly be abs(20) but the mean would likely be closer to abs(13).

From a trader's standpoint and for a single-bar trading strategy, the distribution (ignoring values greater than abs(20)) is interesting in the fact that higher absolute value of returns are associated with higher probability. In other words, mean reverting strategies would likely be a bad fit for this distribution. Once price extends beyond a certain amount in one direction (either up or down), the probability increases that it might continue or stay in that direction (assuming price doesn't reverse from up to down intrabar, for example). That's pretty unusual for a return distribution, considering the usual returns for time-based bars have a high kurtosis (> 3) as shown in your first chart. This M shaped distribution must have a really funky kurtosis!
  • #25
  • May 1, 2013 1:32pm May 1, 2013 1:32pm
Quoting mmaker
I can't believe you guys are analysing the M shape distribution. Do you know how the range bars are constructed? If set to 20pips each bar will chop off exactly at 20pips and a new bar created. Every bar is constant range of 20pips. It's an artificially created chart with fixed range 20pips if set that way. The M shape distribution reflects that and there is no analysis to speak about.
Well I think I have a little clue about how to build the range bars since I built them from tick data <;!)

I indeed didn't think about big moves that will produce a lot of full bars thus increasing their ratio. But I see a lot of hammer-like bars on a range chart. It would have been less of a surprise if I had seen two modes at +10 and -10 for instance.

I'm not analysing this distribution. I didn't even know it was called bimodal. It was just to sharp in the middle to be an arcsine.

I just wanted to be sure that the market is Cauchy and not Gaussian. That's it.
Cauchy = no mean + infinite std dev = Lots of problems
No greed. No fear. Just maths.
  • #26
  • May 1, 2013 11:46pm May 1, 2013 11:46pm
IMO, by using alternative chart is not really important for those traders, who do not rely on their eyes to time entry and exit. The noise are being filtered all the time by these charts (Depend on the setting). In fact, the movement is still existence or cannot be changed, if price moves up x pips and move down y pips, it is there. Yes, these chart can do a good job to filter this movement, but if you have opened position, position might be closed out because of the fluctuation that chart doesn't display.

Of course these charts could make your eyes comfortable and easy to spot trading opportunity, however it is lagging, but i cannot deny this is the best tool among the indicators (Trend and oscillator indicators). Take an example, for renko bar chart, next bar would only be formed if price move x pips to upside/downside. So is this lagging? Yes.

The real purpose of these chart is to provide you a good view of trend direction, where could it go? which direction could you expect? Then use price action to time your entry and exit. If you want to use these chart to time your entry and exit, then the setting is really important, depend on how much of pips fluctuation that you would like to ignore (Means you could take the risk), because charts doesn't display the movement. Example for renko chart, now is uptrend, one bar equal 100 pips, so if price reverse or make correction to downside < 100 pips, then price move back to uptrend again without form next red bar, so you must take this risk < 100 pips with spread as well due to free margin become less during these movement.

To conclude, one must fully understand these chart function, so to know how to use these in right way.
  • #27
  • May 2, 2013 12:10am May 2, 2013 12:10am
Quoting ~bull.bear~
To conclude, one must fully understand these chart function, so to know how to use these in right way.
Agreed. I followed a system where we used 3 "timeframes" for market analysis. So for range bar charts, we use 4RB, 8RB, 16RB (meaning 4pips, 8pips, 16pips range bars). Range bar does not distort the exact high or low prices so it's closest to regular time-based candlesticks, compared to Renko. The different currency pairs also have different volatility so we can't use one setting for all.

One useful feature of range bar is timing the entry on candle close. For example, if EURUSD reached a high point of 1.3400 and decided to reverse down, then waiting for 15mins bar or 5mins bar to close is really "affected" by time. Because by the time 15mins bar closes it could have dropped 20pips or more, and 5mins close might get you better entry, again because of the artificial wait for time to elapse. But for range bar chart, if set to 4RB or 8RB, the next bar open is fixed 4pips or 8pips if price moved down this much and doesn't depend on time. Not saying everyone will trade this way, but those looking to time your entry or exit, then range bar is used to achieve a better stop risk.
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  • #28
  • May 2, 2013 5:40am May 2, 2013 5:40am
Quoting mmaker
Do you know how the range bars are constructed? If set to 20pips each bar will chop off exactly at 20pips and a new bar created. Every bar is constant range of 20pips. It's an artificially created chart with fixed range 20pips if set that way. The M shape distribution reflects that and there is no analysis to speak about. {image} {image}
Perhaps range bar charts are artificial, but if so then which charts are natural, exactly?
  • #29
  • May 2, 2013 11:00am May 2, 2013 11:00am
Quoting ~bull.bear~
In fact, the movement is still existence or cannot be changed, if price moves up x pips and move down y pips, it is there. Yes, these chart can do a good job to filter this movement.
That's not this kind of noise they filter the best. Range bars are very good at filtering 1/f noise: a huge bearish outside bar engulfing 4-5 previous bars against your long position on a time chart becomes a counter trend on a range chart. You can close earlier.

They are also very good at showing if the price is running straight through a support you want to buy because you can afford waiting another bar to get a reversal pattern as you know it won't run very far away. No knife catching and no clumsy late entry.
No greed. No fear. Just maths.
  • #30
  • May 5, 2013 5:48am May 5, 2013 5:48am
Found a range bar script here,
http://www.forexfactory.com/showthre...73#post4049673
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  • #31
  • May 22, 2013 5:56am May 22, 2013 5:56am
Hi guys,
Very interesing thread indeed. I have been using range charts for couple of months now. According to me they are quite useful when used together with time charts. But i m confused with Renko charts. Can some one please explain me the difference bwtween Range charts & Renko charts. If possible please post charts.
  • #32
  • Edited May 23, 2013 12:26am May 22, 2013 11:31pm | Edited May 23, 2013 12:26am
Quoting spearfx
Hi guys, Very interesing thread indeed. I have been using range charts for couple of months now. According to me they are quite useful when used together with time charts. But i m confused with Renko charts. Can some one please explain me the difference bwtween Range charts & Renko charts. If possible please post charts.
You can read about the differences or watch some videos on Youtube. I trade with range bars too and wonder if you or anyone know of a good thread to participate in. The threads I listed earlier are all dead, and I don't want to revive any of it if there are no participants. There are many threads which showed charts with 1mins, 5mins, 15mins, 1hr, 4hrs, Daily, Weekly time-based intervals. I'm looking for an active thread where we can share our ideas about 3RB, 4RB, 5RB, even 10RB (10pips range bar). Remember that what we learned in Steve Nison's candlestick patterns (doji, harami, shooting star, evening star, engulfing bar, hammer, spinning top, etc) are not applicable on range bars.

This thread is about pros and cons "of altered price chart", so wasn't about trade ideas or setups specific to range bars. I have thought about starting my own thread either at Trading Discussion or Trading Journals, but looking at the experience of Seneca Pilot, running a thread can suck up too much precious time and having to "proof" to trolls and read or answer pages and pages of posts. I didn't talk about range bars in the threads I followed because it is not relevant to those threads. Then again, where is the relevant thread we can discuss range bar setups?

1. Katana Trading Strategy
2. Musashi Trading Journal Using Range Bars
3. Nexas's Intraday Range Bar Trading
4. Range Bar Trading with Nexas
5. Range Bar Charts Exposed - The Timing Solution
6. Constant Range Bar Charts Exposed
7. The Power of Range Bars (just found this one today)
8. Samurai Trading - Elite Range Bar System (this is commercial site)
No longer trading forex. Looking for full time job.
  • #33
  • May 23, 2013 2:44am May 23, 2013 2:44am
Quoting spearfx
Hi guys, Very interesing thread indeed. I have been using range charts for couple of months now. According to me they are quite useful when used together with time charts. But i m confused with Renko charts. Can some one please explain me the difference bwtween Range charts & Renko charts. If possible please post charts.
Two things you may not immediately notice with renko charts after you searched the web:

- The amplitude of the price move can be up to 29 pips before a new brick appears on a 10 pip chart. That's about three times the brick size. Renko indi often have the option to show those 'wicks'. That's useful.

- Even less obvious is that it is biased towards the trend. Say you use 10-pip bricks and you just got a red brick. If the price continues another 10 pips down a new red brick appears. But it will need at least, see above, 20 pips up to get a green brick. Of course the same applies for the opposite direction. This asymmetry makes it de facto a trend following chart.
No greed. No fear. Just maths.
  • #34
  • May 23, 2013 3:02am May 23, 2013 3:02am
Quoting mmaker
{quote}You can read about the differences or watch some videos on Youtube. I trade with range bars too and wonder if you or anyone know of a good thread to participate in. The threads I listed earlier are all dead, and I don't want to revive any of it if there are no participants. There are many threads which showed charts with 1mins, 5mins, 15mins, 1hr, 4hrs, Daily, Weekly time-based intervals. I'm looking for an active thread where we can share our ideas about 3RB, 4RB,...
hi mmaker,
Thanks for your reply. I will search youtube for related videos. I mainly use 24RB & 48RB charts together with 4hrs, 8hrs & daily charts. I get about 2-4 trades a week but the success rate is quite high. Regarding renko chart i find it a bit confusing. Of the two i prefer range charts. I will try to send you some of my charts. You rightly said about the lack of actual trading threads on range bars. Starting a new thread can be really time consuming.
  • #35
  • May 23, 2013 3:04am May 23, 2013 3:04am
Quoting PipMeUp
{quote}Two things you may not immediately notice with renko charts after you searched the web: - The amplitude of the price move can be up to 29 pips before a new brick appears on a 10 pip chart. That's about three times the brick size. Renko indi often have the option to show those 'wicks'. That's useful. - Even less obvious is that it is biased towards the trend. Say you use 10-pip bricks and you just got a red brick. If the price continues another 10 pips down a new red brick appears. But it will need at least, see above, 20 pips up to get a...
Thanks PipMeUp,
Yea i have noticed what you mentioned it the post. Thats why i seem to always get confused with renko. Hoping it wil change soon.
  • #36
  • May 23, 2013 3:23am May 23, 2013 3:23am
This is the EURJPY trade i took this morning. The first chart is 25RB chart.
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I took the trade when it reversed from the fibonacci level.
Similarly on the 1hour chart it was forming a typical 1-2-3 pattern.
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The 4hour candle closed later confirmed the bearish scenario. I closed 75% of my position on the mentioned exit level. Holding the remaining position for levels around 99.80.
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  • #37
  • May 28, 2013 10:57pm May 28, 2013 10:57pm
Quoting Ishtana
... pros and cons of trading with altered price chart ...
I'm using the range bars for quite some time ... more than 3 years ... and surely in my opinion there is much more pros than any cons (if any at all) ...
otherwise of course, I wouldn't be doing so for that long ... I also don't agree with term altered ... OK, it's not native in MT4 platform​, but is as standard
in other trading platforms (NinjaTrader, TradeStation) ... however, each charting method requires different approach and comprehensive understanding
... and only then together with very sound and solid money management it's possible to build some successful strategy ... and to see all the differences.
  • #38
  • Jun 1, 2013 10:40pm Jun 1, 2013 10:40pm
Found an interesting site that has some built-in chart types across multiple market instruments. Renko was supported but no Range Bar.
Attached Image
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  • #39
  • Last Post: Sep 1, 2021 3:18am Sep 1, 2021 3:18am
Quoting Ishtana
The subjective choice of box size. Why 8? Why 10? Why any other number? What's the basis of that choice?
Hi!
I also wondered about this. And i found the solution. Look at hte first pic. This is 1min Brent. And the second one - it's the same section, but it's rangebar with adaptive box size. The size depends on market volatility
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