Hi guys! Range bars, volume bars, yes no?
Well, what we normally do when we plot a chart is we put time bars. It means we define an interval and we plot a bar every interval, 1 minute, five minutes 30, daily or whatever.
We are compelled to plot a bar at every new interval because that’s the rule, so an objection could be: “Okay but if if you work on five minutes for example, in those five minutes you are plotting, nothing happens!
Very few traits or very small activity takes place in the market.
You are plotting an insignificant bar, you are plotting something that has no information, no valuable information about the dynamics of the market and that bar can obviously cause some wrong information because you use that path to calculate indicators, to calculate chart patterns and if that bar is not full of content you are doing something with a very strong weakness on the base of it.
So then the proposal is to use range bars or volume bars which are bars you don’t plot at fixed intervals but you plot only when a certain amount of ticks or pips or volume has been exchanged on the market.
In this way every bar has content of information which has the same power, let’s say, the same weight in the market.
So is this good or bad?
Yeah it’s good, maybe it’s good.
I don’t use it personally.
On one side because I don’t trust completely the real-time activity of this but this is just my fault, I don’t use it because I try to put another kind of filters in my systems.
They try to give the same information to the system, which is I use a time window to place orders.
This means when I place the orders I don’t place orders all day long.
You know, those who listen to my videos, that normally I keep the orders valid only in some specific hours of the day, trying to avoid those hours where for one reason or the other the entry would not be as effective as normal.
For example on the DAX future I avoid the first hours of the day and I also avoid normally a period across the lunch pause.
I don’t mean it’s like the old pit markets where everybody was going to eat and so there were the traders on the floor.
Actually it’s just because it’s sort of normal, there is an exhaustion of the morning activity and then a preparation, psychological preparation for the afternoon.
In that lunch break the activity is smaller, less significant and therefore I don’t like to enter in the market in that time.
So with my time filter I try to avoid those problems deriving from the use of lack of information in the market.
If you want to use range bars, volume bars is absolutely fine, you are doing great with it.
I don’t do it because I approach things from another point of view.
Don’t use Renko bars for real-time trading, they don’t work, this is something we can discuss on another video but if you want range and volume is fine.
Another reason why I don’t use this is just because using these charts is sort of looking for the optimum, looking for the perfect setup.
The perfect setup doesn’t exist, this is the truth!
So one thing is that you have a good strategy and you refine, you tweak the strategy that’s fine, but if you start putting as a base of work something that leads to a potential optimal, something that is clean from the beginning because you look for the very best, then probably you are working in a direction that can be dangerous.
You always look for the best, you put in evidence that you look for the perfect things, but these perfect things don’t exist and the whole process might be misleading.
I mean now if you are using or you have been using range bars, volume bars…perfectly fine!
Don’t give up if you are successful, if you like it.
I just said and tried to explain why I don’t feel the necessity of using this representation in my charts.
I use a time window to filter the orders and that’s it.
I hope in any case this help, you can give me your opinion and maybe you if you use it, you can give me your point of view commenting video.
This is it, for this week Ciao from Andrea Unger.