RANGE BARS

Note  - The following method relies on Range Bars - not on time-based bars (e.g. - 1 Minute Bars).

Important Order Flow Insight - The primary reason that we use Range Bars, as opposed to time-based bars, is that for every range bar in a series, they are all the same size as new range bars are only created when price exceeds the pre-determined height of a range bar by 1 tick.

Because of the uniformity of range bars, we can readily align order flow events to the exact prices where these events occurred.

This uniformity allows us to plot order flow events at exactly the price point where they occurred, and thus glean the order flow’s impact on changes in price.

This price change inference is one of the cornerstones of tape reading.

It provides real-time evidence in imbalanced markets either to the demand, or supply side.

It also allows for specific demarcations of areas where traders are in danger of being trapped.

 - More insights into this are detailed in the chapter, “What to Watch For In Order Flow At Breach Lines”.

Also, the uniformity of range bars allows us pre-determined specific price points where bots that have been deployed can enter a trade.

This precision cannot be engineered using time based bars.

The 3 concepts that uniquely define Range Bars:

Have a high / low range that equals the specified range.

Open outside the high / low range of the previous bar.

Close at either its high or its low.

Important Price Action Nuance - One unique advantage of range bars is that they allow you to define a pivot at the close of a bar, whereas with time based bars, you cannot confirm a pivot until the bar after the pivot is formed closes.

Since range bars can only close at either their high or their low, they provide wonderful vehicle to game out ‘What If?’ scenarios for possible outcomes at the end of a bar.

 - These outcomes are delved into more deeply in the chapter, “Close of Bar ‘What If's’”.

Important Trade Execution Nuance - Though Renko Bars are awesome, they can print prices where an instrument did not trade, aka ‘false prints’.  

Since we are deploying bots predicated on the prices printed on the bar, it is not ideal to attach a bot to a bar series that plots false prints of information that did not actually occur in market.

Loophole - If you would like to use Renko bars and you are using Sceeto, my recommendation is to visually monitor your price action and order flow on your Renko charts while attaching your trading bots to Range Bar charts of similar size, which can can exist in the background.  

As the ability to deploy a bot with ease and grace is paramount, Sceeto is designed for you to have bots running in the background.

Important Order Flow Nuance - Feel Free to go as low as a 2 tick range bar in ES.

Important Order Flow Nuance - Listen for, and look for, Conclusionary Order Flow simultaneously on both larger size range bar charts and smaller size range bar charts while deploying Sceetos on smaller size range bar charts.

This will allow you to identify strong Conclusionary Order Flow on the larger charts while your Bot will pounce the smaller range bar charts. 

 - More details are explained in the chapters, “Conclusionary Order Flow” and “Multiple Time-Frame Analysis”. 

Left Strength | Strong, Stronger, Strongest - How to Measure a Swing’s Left Strength

Note - From the traders that I speak with, it seems that some traders use the term ‘Pivot’ for ‘Swing’ and vice-versa.

Also, some traders use ‘Swing’ for ‘Leg’ and vice-versa.

For the purpose of this book, we will be using Pivot to reference price reversals and we will be using Leg for the span from one pivot to the next pivot.

It is important to note, that the larger the bar size and the larger the Left Strength of the Pivot, the cleaner, and theoretically, the more dependable, a price action pattern is for trading.

Please keep in mind that this chapter relates to range bars. 

Important Nuance - Unlike time based bars, range bars can only close at either their low or their high.

When using range bars, if the low of a bar is lower than the prior bar and the bar closes at its high, then this bar forms a swing low.

If the high of a bar is higher than the prior bar and the bar closes at its low, then this bar forms a pivot high.

How to determine a pivot’s left strength’.

Pivot Low | Count out the bars to the left of a swing low until you reach a bar that contains a price that is lower than the low of the Pivot bar.  The left strength of the swing low is equal to the number of bars between these two bars.

Pivot High | Count out the bars to the left of a Pivot high until you reach a bar that contains a price that is higher than the high of the Pivot bar.  The left strength of the Pivot high is equal to the number of bars between these two bars.

e.g.  A Right Shoulder can have a left strength of 1 and still be tradeable.  

However, the higher the left strength of the Right Shoulder, there is less likelihood that the Right Shoulder was created by market noise.

If you use a 4 tick range bar on the ES contract a Right Shoulder whose left strength is >= 5 is a strong candidate for trading.

Trading Right Shoulder Whose Left Strength is 1 or 2

You can trade a Right Shoulder that has a left strength of 1 or 2 if it is part of a larger trend trade.

When trading Right Shoulders that have a left strength of 1 or 2 that is not part of a larger trend trade, it is advisable that the Head is at a known level. 

Important Order Flow Nuance - We also hope to find that both the Head and the Right Shoulder have significant amounts of corroborating order flow to warrant the trade.

Note | If a Prior Bar Has the Same Low High, It Is Included in the Left Strength Count.

Intra-Day Pivots
    Micro | Left Strength > 0 & < 5
    Minor | Left Strength >= 5 & < 8
    Major | Left Strength >= 8
BEST PRACTICE REMINDER - Listen for, and look for, Conclusionary Order Flow on larger size range bar charts while deploying Sceetos on smaller size range bar charts.

This will allow you to identify strong conlusionary on the larger charts while pouncing on the smaller range bar charts once new fuel is identified in the order book.

Your Sceeto will identify this new fuel in real-time and will immediately pounce.