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Low range bars

This will be quick and dirty to get started. It deals with low range bars as we got into that a bit today in the Es thread. For this example I am using the 15 minute bars. I suggest waiting 90 minutes or looking at specific volume spikes before attempting to utilize or incorporate the idea which is this:

Most of us have learned to look for low range daily and weekly bars. The mypivot sites posts NR 7 and NR4...see forum for definitions. So I was taught back in 1998 or so to look for low range bars on any timeframe. I think anything under 5 minutes if too agressive.

We are assuming that low range bars are implying one of two things :

1) trend exhaustion or
2) Trend pausing before resuming.

So we can use these low range bars to enter or exit. I mostly use them to gear stops on runner contracts if I can't find a good stop loss point. Which happens quite often..

Here is todays chart:

1)Bar 0 makes a new low and a volume spike
2)Bar 1 is the lowest range of any 15 minute bar of the day.
(From this point on I am explaining how you could use them not specifically if or how I did in the ES thread - we spoke about the 5 minute low range bars for reference)
3) So we know that bar 1 will either imply a dry up of selling or a pause before selling off some more.

4)You could buy one tick above its high as Bar a begins. Now this is critical. It will take an OUTSIDE BAR ( OVB) to form with Bar a 's trading before you get stopped out at the other end of Bar 1. So Bar a could form an OVB to the downside and you could think about reversing to short if you are agressive. Or if bar a closes badly or inside bar 1 you may exit.

5) otherwise you are trying to target the distance of the bar . So if bar 1 is 3.75 points you want to try and get that far up off bar 1's high.

Think of the OVB concept ! It will take an OVB in the opposite direction of your entry to stop you out or a poor close

6 ) Bar 2 makes another low range bar even smaller than Bar 1

7) Buying the break of that achieves the profit objective for that bar and the bar 1 bar...Bar b hit the profit objectives

8) So we come down and break bar 2's low again on Bar D and we fail to achieve the profit objective....Bar E breaks above Bar 2's high and doesn't go back below the bar 2 you would reverse long to the new profit objective.

9) After trying to get into yesterdays low we get another measley 2 point bar with bar 3. Bar "c" sends you short and we never go back above the bar 3 high..profit reached!

I know this chart is busy but just think about what if anything these low range bars MAY be telling us....

Is the market out of power to the upside or downside? Why are they forming where they are?

Look how bar E breaks bar 2's low again and no 15 minute bar ever trades back above bar two's high no reversal to long or stop out..

I've posted most of the raw entries and certainly not suggesting anyone take all of them but put these low range bars in context and think about using them for stop losses....

Hopefully I haven't confused too many.....A basic concept and hopefully I have made it too complicated.....what does any contraction of range imply? How many times would you stop and reverse before you get a good entry..? I suggest 3 times maximum if you are agressive.
Use the range bars in market context and at your pre-defined S/R levels

How often do OVB's form after Low range bars on the 15 minute or whatever time frame you use?

Click image for original size
Last chart in this series as I think the concept is fairly direct...

we came into today with 78 - 81 again and the 72.50 number
Click image for original size
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