What are Range Bars?

Range Bars were developed in the mist of 1990s by Brazilian broker trader called Vicente Nicollelis. This is the reason why some people refer to the bars that he developed as the Nicollelis range bars. Nicollelis had spent more than 10 years running a desk for trading in Sao Paulo, Brazil. At that time, the Brazilian markets were very volatile.

Nicollelis harbored interest on how to develop a way in which he could use that volatility in
order to trade at his advantage. He had the belief the movement in price was very vital to the understanding and use of volatility. He thus developed the Range Bars in order to take in to consideration the price factor only while eliminating the time factor from the whole equation.

Nicollelis came to find that those bars which were based on the price only but not the time or any other market factor provided new way of utilizing and viewing the volatility in the markets. At the moment, the Range Bars are gaining more popularity because the traders can use and rely on them in order to interpret the volatility and then place trades which are very well timed.

The example image below shows the difference of a time chart and Range Bar chart.

Range Bars On A Chart

See the difference in movement (noise) of price

How to calculate the range bars

The Range Bars take in to consideration  price only. Each single bar represents some
movement in the price. The Range Bars can have few or many bars during a session of trading. When the market is highly volatile, more bars are very highly to print. Similarly, when the market is not volatile few bars will print. The quantity of the range bars that are created during particular session of trading are also dependent on the instrument which is being charted and also the particular movement of price within that range bar.

The range bar rules

Each range bar should

  • Have high or low range which is equal to the specified range
  • Open outside low or high range of the preceding bar
  • Close at its low or high

The conclusion

Even though, strictly speaking the Range Bars are not a technical indicators, they are a very vital tool which the traders can employ in order to interpret volatility and identify the trends since they consider PRICE ONLY, the traders can rely on them to get insight into the activity of price in the market. The good traders spend a sufficient amount of time observing the range bar charts and then identifying when to enter a trade. If you want simple clean charts then Range Bars give you that.

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