The monthly S&P500 Emini futures candlestick chart has not had a pullback in 14 months. This has...
Range Bars Magnify Volatile Markets
12/07/2011 1:30 pm EST
Range bars can help short-term traders get a better read on the market’s speed and "mood," says Markus Heitkoetter, and they can be applied in a variety of markets.
Today we’re talking about using range bars with Markus Heitkoetter. Markus, how is this different than the traditional time or volume charts that many people are accustomed to using?
Well when plotting a time-based chart like a five-minute chart, you plot a new bar or candle after a certain amount of time has elapsed; for example, five minutes.
Using volume-based charts, you incorporate the volume information, so you plot a new bar or candle after a certain amount of trades have taken place.
When using range bars or the so-called “volatility-based charts,” you plot a new bar or candle after the market has moved a predefined amount.
Now does this change at all with extreme market volatility such as we’ve seen recently?
Actually, it’s perfect for the ever-changing volatility in the markets because what happens is if the market moves quickly, you get more bars, so you’re expanding the charts during times of high volatility, and you’re contracting the charts during times of low volatility.
And ultimately, as a trader, what I’m interested in is how much the market moves.
Now does this work with any particular asset class better than another, or how is this best used?
It works on any asset class. I personally like to daytrade futures, so I’m using it on the futures market, but you can use it in the forex market or in the stock market equally well.
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