Wide Range Bodies or 'big' candles

[Anonymous 11]

Pivot : now you got a little more sense on your setup and the indicator usage its fine, you are not trading the indicator, you are using a fine setup criteria ( by itself) and the indicator is helping you to time the trade in the area of your criteria....

 

I do not use indicators and no not like them. I was merely trying to make a point to the likes of yourself.

 

Price Action itself is enough to enter the trade, once you know the context that creates the price action. That is where VSA and WRB & Long Shadow Analysis come into play for me. And this is why I call VSA and WRB & Long Shadow Analysis primary methods and Japanese candlestick patterns (price action patterns) a secondary method.

[Anonymous 11]

B.F.

 

You haven't posted a chart here in awhile. Still using them? Did the change to multi charts effect on the appearance of WRBs?

 

Keep the thread alive.

[brownsfan019 17]

B.F.

 

You haven't posted a chart here in awhile. Still using them? Did the change to multi charts effect on the appearance of WRBs?

 

Keep the thread alive.

 

Pivot - I meant to post an update here, sorry about that.

 

Yes, the move to a constant volume chart does impact the appearance of WRB's quite a bit. While they could work with the TS setup, I just cannot subject myself to a 'what if' scenario every day - what if TS does show many today, what if they don't? Just too much open to interpretation by their software.

 

As a result of the more 'smooth' looking charts with constant VBC's, I have not used WRB's as discussed here. I see the value of the WRB's for sure, but implementing them on a more smooth looking chart is difficult to do.

 

Now, I should say that depending on how you define a WRB, WRB's are definitely on the constant VBC. For example, if you say if the body is larger than the previous 3, 5, etc bodies, then yes, there are plenty of WRB's on a constant VBC. As I mentioned before however, I was using them more in a visual inspection vs. a hard defined definition.

 

I realize the devil's advocate here then says to just stick with TS and that I may be on to something there... and possibly there is... Like I said though, I personally cannot go into the trading day wondering how much or little TS will put over my threshold settings. I just do not like being subject to their software's interpretation of volume flow.

 

I have a question for you though - have you inspected how WRB's react on a tick chart? Just curious...

 

One other note - on a daily chart I think WRB's could be extremely useful as well. Just some food for thought...

[Anonymous 11]

Thanks for the update B.F.

 

I was interested in seeing if there was indeed a change based on the fact that some of the TS bars actually had more volume than they should. I understand where you are coming from.

 

As you know, my primary methods are Volume Spread Analysis and WRB & Long Shadow Analysis. VSA looks at volume in part from a relational point of view. Hence, time is kept constant to see changes in volume. This is why I do not like Constant Volume. I should say, I can't use constant volume candles. I do like the fact that the chart "speeds" up in proportion to activity.

 

From a VSA point of view, volume is activity. Thus tick volume can be used where actual volume is not available. However, a tick based chart, still holds the amount of activity constant from candle to candle. So I have not even looked at tick based charts.

 

But from a pure WRB standpoint, a WRB is defined as a candle with a body that is larger than the previous three (3) candles. OR coded HHV((open-close),4) -the WRB is included thus we are looking at 4 bars at a time. Of course there are other ways of defining a WRB. But my point is that despite the chart type they still do exist. So they would be on a tick chart as well.

 

Since WRBs represent changes in supply/demand they should by definition have similar effects on tick charts. The Caveat I would add is that there are at least three things that make a WRB significant:

 

1. Volume.

2. Size (in relation to other WRBs).

3. Creation due to news events.

 

It is the fist one, volume, that cannot be utilized when the volume (activity) is held constant via constant volume or tick candles. Nevertheless, WRBs exploit changes in supply/demand, exploit trends, exploit support and resistance, and exploit volatility. Simply, there use should not change too much especially if used primarily for market generated profit taking techniques as you do.

 

P.S. to play devil's advocate myself, it is interesting that when you had bars with varying volume you could take advantage of WRBs. In other words, you actually had bars that were relational in nature, all be it unbeknownst to you. On a time chart, we know that volume and range are correlated............

[brownsfan019 17]

Pivot - little update here - I did notice that when I increase the volume threshold on a constant VBC chart that WRB's not only appear, they can be fairly strong areas to exit. So, something for me to consider and look at closer since I enjoyed using the WRB's on the 'subjective' TS VBC chart.

 

To put this in perspective, I looked at an ES chart today of 15k, 25k, and 30k for the volume threshold. I've been using 3500. So, not only are the WRB's appearing on the larger settings, they are more reliable (so far) than something found on the 3500 setting.

 

I'll try to remember to post some updates and charts here to keep the discussion going and provide good analysis over multiple chart settings.

[brownsfan019 17]

Here's a WRB chart from today with some nice exits.

 

This is an ES chart with a 15,000 VBC setting. As I said in the previous post, WRB's are more obvious on a larger VBC setting. So, my suggestion at this point for anyone interested in WRB's and using a VBC chart is to consider a 'higher' VBC setting. At least what I would consider a higher setting. I've been looking at different settings for the VBC and there's a fine line between helping to keep the noise down and to having too little going on in my opinion.

 

[brownsfan019 17]

Pivot - you still out there? :p

 

Update: Considering how good the WRB's can be for exiting and since they are not as noticeable on a constant VBC chart, I have a 5 minute chart up during the day for the ES. If anyone out there is still reading this thread, I'll throw some screenshots up, but if not, no point in wasting time.

 

So, anyone - Pivot or not - if you like this thread and like watching my progress on WRB's, let me know and I'll continue with updates. I just don't want to take screenshots, annotate them, post them here with explanations if I'm the only one looking at them!

[Anonymous 11]

Sounds interesting. Please tell me (us) more.

[brownsfan019 17]

Pivot,

Glad to see you are still checking this thread out!

 

Here's a chart from this morning from an actual trade. This chart is a 5 minute ES chart and as you can see, if you get long into the move near the open, three WRB's appear to provide nice exits.

 

The net on this trade was +4.83 ES pts/contract.

 

[brownsfan019 17]

So here's the million dollar question pertaining to WRB's:

 

When exiting, do you wait for the WRB to close or exit as a WRB is being formed. That is the big question here and I refer to the decision as my "Blackjack Strategy" which I mentioned in another thread and may post a better explanation here as well. In a nutshell, you must do the same each and every time.

 

My current position on this question is to wait for the close. It's more mechanical and no 2nd guessing involved. Yes, some WRB's actually close lower or not a WRB at all. It will happen. But when a 4 pt WRB appears and you take 1.5 or 2, you just left a lot of money on the table.

 

What do you think Pivot? Maybe Mark can share as well if he stops by.

[Anonymous 11]

Great stuff. Really appreciate it, please keep it coming.

 

You know that I like the trailing stop method, but let's talk about the options you have mentioned.

 

First, it is pretty clear that regardless of method employed, a situation (more than one) will appear where the opposite method would have been more optimal. That may seem like a "captain obvious" statement and many would say that is why trading is so hard.....

 

I do not want to speak for Mark, but I believe he would say that an understanding of the price action would determine which method is best at any particular time. That is, since every situation differs, the more one understands the individual situation, the better each situation can be individually managed.

 

Now I have not tried this and am really just "thinking aloud " here, but what about a combination like this? Start out with exiting on the close of the WRB as you have previously mentioned. However in special cases exit on the appearance of a WRB if it is say, greater than 3 x's the average WRB on the chart. The special case IS the size of the WRB. But you might note that the size of certain WRBs are related to news events and other types of events.

 

Therefore, you could still have the "Blackjack" idea. BTW would love to hear more about this, where can I find It?

[brownsfan019 17]

Therefore, you could still have the "Blackjack" idea. BTW would love to hear more about this, where can I find It?

 

http://www.traderslaboratory.com/forums/f37/my-blackjack-strategy-1701.html#post10339

[brownsfan019 17]

Great stuff. Really appreciate it, please keep it coming.

 

You know that I like the trailing stop method, but let's talk about the options you have mentioned.

 

First, it is pretty clear that regardless of method employed, a situation (more than one) will appear where the opposite method would have been more optimal. That may seem like a "captain obvious" statement and many would say that is why trading is so hard.....

 

I do not want to speak for Mark, but I believe he would say that an understanding of the price action would determine which method is best at any particular time. That is, since every situation differs, the more one understands the individual situation, the better each situation can be individually managed.

 

Now I have not tried this and am really just "thinking aloud " here, but what about a combination like this? Start out with exiting on the close of the WRB as you have previously mentioned. However in special cases exit on the appearance of a WRB if it is say, greater than 3 x's the average WRB on the chart. The special case IS the size of the WRB. But you might note that the size of certain WRBs are related to news events and other types of events.

 

 

Pivot - you are right, there's probably many different combinations of using the WRB to exit that may or may not work better than exiting at the close or during the formation. As you said, either way looks great in hindsight.

 

I like the close the best simply b/c it's mechanical and there's no 2nd guessing yourself, which I am great at doing. I know we could analyze the AM vs. Lunch vs. PM vs. Econ News vs. Non-Econ News etc. etc. to see where the best might have been. To be honest, I think in the end, it's simply a matter of doing the same thing, each and every time, like I attempted to explain in the blackjack thread.

 

I think that whether it's trading, blackjack, etc. to randomly pick your entries, exits, etc. is a loser's game and the 'house' will always win in the end. I really don't see how someone could randomly choose their entries, exits, etc and think that's a good way to make money.

[brownsfan019 17]

Update here on the WRB front - as the charts I've posted have shown, when there is a WRB, it should at the very least get your attention. How you interrupt that info is up to you.

 

There is one serious flaw with WRB's and using them for exits however - when they don't show up! :mad: In other words, if you have a trade that moves in your direction but a WRB does not appear, the question becomes what to do. That has been causing some frustration on my end. For example, I had an ES short on 5/4/07 that moved approx 4 pts in my direction. One WRB appeared that provided a good exit. Since I am trading multiple lots however, I was looking to exit at different levels and all that showed up was one WRB. Of course the argument is to simply exit on the first WRB you see. The rebuttal to that being it's not uncommon to see more than WRB appear.

 

So then it's simply a matter of taking most/all off at a certain point (however you determine that) or try to catch the bigger moves (when they are there).

[Anonymous 11]

...There's a difference between a Wide Range Bar and a Wide Range Body although both are called WRB.

 

The Wide Range Bar is a term associated with Bar charts and represents the price area between the High and Low.

 

In contrast, Wide Range Body is a term associated with Candlestick charts and represents the price area between the Close and Open.

 

The subjectivity from one trader to the next is how they define a WRB in relationship to the prior price action.

 

My own personal preference is that a WRB has a body with a price area > body price area of each of the most recent prior three intervals.

 

Therefore, base upon my above definition, I'm obviously using candlestick charts.

 

That personal definition for me is not subjective.

 

Yes, you can easily code a WRB to that they are either color coded or whatever with programs like Tradestation.

 

Yet, after a few weeks of looking at them, you really don't need any code to tell you if something is a WRB or not unless your doing some sort'uv trend strength analysis.

 

In the past, I found the counting of WRB's as a great tool for trend strength analysis.

 

However, I've been using them since the 80's and don't need a computer code to count for me because I can quickly count them via visual inspection of the trend.

 

When I first started trading and studying the markets, I called them Wide Range Bars until the arrival of candlestick charting software. That's when I began calling them Wide Range Bodies especially when I became more of a price action only trader.

 

Last of all, the study of WRB's (WRB Analysis) is basically volatility analysis as it interprets changes in supply/demand.

 

Mark

(a.k.a. NihabaAshi) Japanese Candlestick term

 

From another site but wisdom is wisdom. Mark, we all wish you would impart more of it here.

 

P.S. BrownsFan. While the definition of a WRB can be hard coded, it still can be visual. WRBs appear more than you think when you use the basic definition above.

[wrbtrader 10]

Update here on the WRB front - as the charts I've posted have shown, when there is a WRB, it should at the very least get your attention. How you interrupt that info is up to you.

 

There is one serious flaw with WRB's and using them for exits however - when they don't show up! :mad: In other words, if you have a trade that moves in your direction but a WRB does not appear, the question becomes what to do. That has been causing some frustration on my end. For example, I had an ES short on 5/4/07 that moved approx 4 pts in my direction. One WRB appeared that provided a good exit. Since I am trading multiple lots however, I was looking to exit at different levels and all that showed up was one WRB. Of course the argument is to simply exit on the first WRB you see. The rebuttal to that being it's not uncommon to see more than WRB appear.

 

So then it's simply a matter of taking most/all off at a certain point (however you determine that) or try to catch the bigger moves (when they are there).

 

Hi brownsfan019,

 

There are several different ways of using WRBs as profit targets.

 

Lets use your Short in Emini ES futures on May 4th Friday as an example even though I don't have access to the type of chart you were using:

 

* You wait for a Dark WRB to form below your Short Entry

 

* You use a prior White WRB s/r zone as a profit target

 

* You use a prior Long Lower Shadow that produced a swing point as a profit target (long shadows at one point in time were a WRB).

 

* You use a prior pattern signal that produced a swing point as a profit target.

 

* You use the s/r zone of a prior key market event (economic report, regular schedule event like a FED speech, geopolitical event et cetera) that produced a swing point as a profit target.

 

* You use the s/r zone of a GAP between today's Open and yesterday's Close (gap fill is the profit target).

 

My point is you need to pick a profit target trigger price prior to your entry that tells you if a Dark WRB doesn't form below your entry while price continues dropping in your favor...

 

That's when you use one of those prior WRB events as profit targets because they are shifts in supply/demand that produces support/resistance zones.

 

Another solution is intermarket analysis.

 

You will use a highly correlated trading instrument or index to Emini ES and if it develops a Dark WRB while ES does not...

 

You treat the trade in ES as if it did reach a Dark WRB.

 

The worst case scenario for WRB as a profit target is if you find yourself in a situation where you didn't manage the exit properly when those prior WRB targets were reached...

 

Exit the position at a profit on the next White WRB retracement against your Short position.

 

I think for May 4th Friday many of the above possibilities occurred.

 

Last of all, you need to have what I call a Max Profit Target for your trade prior to entry.

 

That means if no WRB's appeared and you decide to ignore all prior WRBs or s/r zones as profit targets...

 

You exit your position at the Max Profit Target.

 

For example, I currently trade the Russell Emini ER2 futures.

 

My Max Profit Target is 10 points and on a few occassions I have hit that target and exit my position eventhough it was not a WRB exit.

 

These types of price action scenarios needs to be mapped out prior to your entry to prevent trade management problems and for you to document in all so at a later date you can determine which type of Profit Target Contingency Plan solution is suitable for your trade management style.

 

Mark

(a.k.a. NihabaAshi) Japanese Candlestick term

 

"Volatility Analysis is an open door to consistent profits."

[Anonymous 11]

B.F. has spent much time talking about profit targets and WRBs. I have tried to show the other numerous aspects of their use and the information they impart to the trader.

 

I have shown a chart about this idea before. What we have here is the use of WRBs as a contingency plan trigger.

 

A contingency plan basically is a set of rules that state if Price does A,B,C, then the current trade is not valid and one should look to position himself on the opposite side. That is, if long, get short.

 

This not the same thing as a simple stop and reverse. One does not have to be stopped out of the long, for example, to get short via a contingency plan (Price Action).

 

I have attached a good example from Thursday. Note this chart was taken prior to Mark's Post .

 

What we see are two valid tests. While the time of day would be reason enough to stay out of the market, we will ignore that fact.

 

The key concept here happens after the second valid test. As soon as we get a valid test bar, we see a large dark WRB engulf it. The WRB closes below the low of the test bar. At this point, we have "no result from a test" or more generally, "Negative Action". Negative Action is when the market does the opposite of what is "expected". That is , after testing for supply (sellers) and finding none, we would expect price to rise. Instead, it falls.

 

Note that this second test is a "test in a rising market" and therefore a strong sign of strength.

 

If a trader places his stop just below the test bar, he would be stopped out and then re-enter short on the close of the WRB or next open. If the trader is not stopped out, he would short twice as many contracts to get net short.

 

ADVANCED CONCEPT:

 

What is not shown here is a 15 min chart. The 15 min chart was in a down trend. There were also no obvious signs of strength (demand) entering the market. In other words, a trader using multiple timeframes would see no reason to get long on either test. Yet, once he sees a dark WRB closing lower than the test bar (long entry signal), he has the weakness confirmed by the shorter timeframe and can get short. Here the trader is not using a contingency plan, but the lack of result (negative action) as the primary entry.

[brownsfan019 17]

Mark & Pivot - thank for you sharing, I appreciate it.

 

In the spirit of keeping things simple (just how I am) there appears to be quite a bit of outside areas, WRBs, etc. that could take you out of a trade. The question I would then have is, how far back are you looking for previous WRB areas? I am just trading intra-day on a 5 minute chart, so especially in the AM there are not many WRBs to use, if any; unless using a previous day(s) WRBs. And then the question is which ones to use and why?

 

My concern would be having too many lines or possible exit areas to choose from. Of course one of them will look great in hindsight, but why would you exit at one level vs. another level?

[waveslider 10]

Hello, I am new to trader's lab. Happy to see quality discussions going on. I have read this forum and would like to bring up an idea regarding WRB.

My objective is to identify congestion here.

An example:

A bearish WRB and bullish WRB occur in the same price vicinity. Subtracting the open of the bearish WRB from the open of the bullish WRB, can this be established as a range, particularly if they overlap?

The way I am identifying the open of the bearish and bullish WRBs is as resistance and support respectively. Would this be a correct analysis?

I would consider the price held in this congestion as long as close remains below/above these levels.

Thanks for your input.

slider

[brownsfan019 17]

Slider - welcome to the discussion.

 

Give us some chart examples to look at. Pictures say a lot more than any of our words can. And it makes the analysis much easier! If you need a very user friendly screenshot program, I use this - http://www.techsmith.com/snagit.asp

[BlowFish 10]

Hey there WS. You might take a look at Joe Ross' law of charts. He has a way of rigorously defining congestion. He has what he calls a 'measuring bar' (a wide range bar as opposed to a wide body bar). Essentially all the time bars/candles have an open of close within this measuring bar you have congestion. Early recognition of the type of trading you are in is one of the several important concepts in trading imho.

 

I am not saying yay or nay on JR however his law of charts is an excellent place to start for a basic blueprint of price action. It defines pretty unambiguously trends, congestions, 'ledges' and corrections.

 

btw the formation you describe is an 'upthrust'/'test' in VSA/Wycoff speak or a long leg doji in candle speak.....before you say "BlowFish you are out of your mind" ...let me qualify that...it is one of those formations over two bars. Put another way the formation you describe on a 5 minute chart would be a long leg doji on a 10 minute chart

 

Cheers,

Nick.

[waveslider 10]

Hi, thanks for the responses. I am familiar with JR and have found him useful in a common sense way. What I prefer about WRB is that they show reactions on either side of price action, establishing where buyers and sellers are.

I see what you are saying about the doji part Nick. I use tick charts however and they seem to come out differently.

Keeping it simple, as you see in the chart I am posting, when close is between 2 wide range bodies (I trade YM and so I use a 20 pt. max between these two), I define it as congestion.

Look at the bar thing above price and you can see that when this happens it flips yellow. WRBs are denoted with purple spots. When price once again closes outside of the range, color turns to red or green.

So I am just trying to generate some ideas on this board here, sound off and get opinions.

While I'm on it, I have done some testing and found that by counting the number of bullish WRBs compared to bearish WRBs you have a pretty good trend/bias filter. Spark any ideas?

I attached a picture, not sure if it worked..

slider

[walterw 10]

Hi, thanks for the responses. I am familiar with JR and have found him useful in a common sense way. What I prefer about WRB is that they show reactions on either side of price action, establishing where buyers and sellers are.

I see what you are saying about the doji part Nick. I use tick charts however and they seem to come out differently.

Keeping it simple, as you see in the chart I am posting, when close is between 2 wide range bodies (I trade YM and so I use a 20 pt. max between these two), I define it as congestion.

Look at the bar thing above price and you can see that when this happens it flips yellow. WRBs are denoted with purple spots. When price once again closes outside of the range, color turns to red or green.

So I am just trying to generate some ideas on this board here, sound off and get opinions.

While I'm on it, I have done some testing and found that by counting the number of bullish WRBs compared to bearish WRBs you have a pretty good trend/bias filter. Spark any ideas?

I attached a picture, not sure if it worked..

slider

 

 

Wave : could I know what software are you using and what time frame is your posted chart ? thanks Walter.

[waveslider 10]

Using tradestation and 89 tick charts ..

[walterw 10]

Using tradestation and 89 tick charts ..

 

Ok Wave, so let me see, you get a SR area that is formed between two wrb one up other down, and if things go above or below that gives you a bullish or bearish bias... am I right ?