How Traders Create Range Charts: Tutorial
In this tutorial, we explore Range Charts, a sophisticated tool that offers traders a unique perspective on price action analysis. Unlike traditional time-based charts, which plot price against time intervals, Range Charts focus on price movements within predefined price ranges or "bars." These bars are formed based on a specified price increment, such as ticks or points, rather than fixed time intervals.
The construction of Range Bars involves a systematic approach to capture price movements. Here’s how it works: Each Range Bar is plotted when the price moves a specified distance from the previous closing price. For example, if we set a range of 10 points, a new Range Bar will be formed whenever the price moves up or down by 10 points from the closing price of the previous bar. This method effectively filters out market noise and uneven price fluctuations, providing traders with clearer signals of market trends and potential entry or exit points.
By mastering Range Charts and their construction principles, you'll gain a powerful tool for analyzing market trends with greater accuracy and confidence.
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