Candle Range Indicator

What is the Candle Range Indicator?

The Candle Range Indicator is a technical analysis tool used in Forex trading to measure the volatility of a currency pair. It calculates the difference between the high and low price of a candle and plots the result on a chart, allowing traders to quickly assess the market’s movement and make informed trading decisions. This indicator is especially useful in range-bound markets, where price fluctuates within a certain range. You could use it to place orders at the market price or set a stop order just above the resistance level or below the support level.

Candle Range Indicator Strategy

A strategy that uses the Candle Range Indicator for Forex trading could be as follows:

  • Identify a ranging market: Use the Candle Range Indicator to confirm that the market is in a range-bound phase, with price oscillating within a set high and low.
  • Set the range: Based on the indicator readings, set the high and low levels that define the range.
  • Wait for a break: Watch for price to break out of the established range, either above the high or below the low.
  • Enter a trade: Once the break has been confirmed, enter a trade in the direction of the break.

Buy Signal

candle range indicator Buy Signal
candle range indicator Buy Signal

A buy signal using the Candle Range Indicator in Forex trading could be defined as follows:

  • Identify a ranging market: Use the Candle Range Indicator to confirm that the market is in a range-bound phase, with price oscillating within a set high and low.
  • Set the range: Based on the indicator readings, set the high and low levels that define the range.
  • Wait for a break: Watch for price to close above the high of the established range.
  • Enter a trade: Once the break has been confirmed, enter a long (buy) position.

Sell Signal

candle range indicator Sell Signal
candle range indicator Sell Signal

A sell signal using the Candle Range Indicator in Forex trading could be defined as follows:

  • Identify a ranging market: Use the Candle Range Indicator to confirm that the market is in a range-bound phase, with price oscillating within a set high and low.
  • Set the range: Based on the indicator readings, set the high and low levels that define the range.
  • Wait for a break: Watch for price to close below the low of the established range.
  • Enter a trade: Once the break has been confirmed, enter a short (sell) position.

Candle Range Indicator Pros & Cons

Pros

  • Simplicity: The Candle Range Indicator is easy to understand and use, making it accessible to traders of all levels.
  • Volatility measurement: It provides a quick and accurate way to measure market volatility, which is useful in range-bound markets.
  • Confirms trends: The indicator helps confirm the presence of a ranging market and can be used to confirm breakouts and trend changes.
  • Objectivity: The indicator removes the subjectivity often associated with chart interpretation by providing a clear, numerical representation of market volatility

Cons

  • Limited usefulness: The indicator is only useful in range-bound markets and may provide false signals in trending markets.
  • Lags behind price: Like all technical indicators, the Candle Range Indicator is based on historical price data, so it can lag behind price action.
  • Does not predict future: The indicator only provides information on the market’s past behavior and does not predict future price movements.

Conclusion

In conclusion, the Candle Range Indicator is a simple and effective tool for measuring market volatility in Forex trading. It can provide valuable information on the presence of a ranging market and can be used to confirm breakouts and trend changes.

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