What are Wide Ranging Bars?
Wide Ranging Bars are strong momentum indicators that help traders understand the market direction and identify ideal entry and exit points. They can also help interpret a currency pair’s volatility in the Forex market and enable traders to make optimum trade decisions. Let's take a deep dive into Wide Ranging Bars (WRB) to learn how you can make the most of it when Forex trading:
Understanding Wide Ranging Bar trading strategy
A Wide Ranging Bar occurs every time a currency pair trades outside its previous price range. Wide ranging or long bars are at least twice the normal bar’s size (in length), which makes them easily identifiable in a Forex chart. These bars usually appear after major economic news or announcements and provide traders with strong market trends.
- If there is a Wide Ranging Bar in the upward direction, it signals a strong upward market momentum
- If there is a Wide Ranging Bar in the downward direction, it signals a strong downward market momentum
Calculating Wide Ranging Bars
As Wide Ranging Bars are based on only the market prices, different numbers of bars that emerge during a particular trading day. This means, when the market is more volatile, there are more bars present on the charts, and when markets are less volatile, fewer bars appear. Understanding how the number of Wide Ranging Bars change due to a particular currency pair’s price volatility in the market can help traders predict future market movements. More volatile currency pairs generally lead to a downtrend in the market, whereas less volatile currency pairs generally lead to an uptrend in the market.
Types of Wide Ranging Bars
1. Bullish Wide Ranging Bar
A Bullish Wide Ranging Bar indicates a currency pair opening near its low price and closing near its high price. There is a sudden shoot up in prices, and it is easily identifiable in the chart as an extremely long candlestick with a longer upper wick and shorter lower wick.
2. Bearish Wide Ranging Bar
A Bearish Wide Ranging Bar indicates a currency pair opening near its high price point and closing near its low price point. It is a sudden dip in prices and easily identifiable in the chart through an extremely long candlestick with a longer lower wick and shorter upper wick.
3. Expansion Wide Ranging Bar
Expansion Wide Ranging Bars are long candlesticks with small wicks that close at more than 50% of their candle’s range, implying that the market prices are expanding. They indicate strong moves and are generally seen during intraday trading as the short-term ranges expand and contract regularly with market players fighting for directional control. Each Expansion Wide Ranging Bar closes near to either the intraday high price or low price and depicts information about the currency pair's demand and supply that can be used to make successful buy and sell decisions. These bars help in confirming market price developments and sharp decrease or increase in the price momentum. Each expansion bar emerges from a price movement that results in a trend reversal or trend continuation breaking the moving average price.
What do Wide Ranging Bar candlesticks indicate?
All candlesticks, including the Wide Ranging Bar candlesticks, indicate market highs, lows, open price and close price.
Considering a bullish Wide Ranging Bar, this candlestick always closes at a higher position than the last candlestick because the buying forces are stronger than the selling forces. The highest point or topmost part of the wick in this candle indicates the price point where the sellers are willing to sell the currency pair in the future. On the other hand, a bearish Wide Ranging Bar is a candlestick that always closes at a lower position than the last candlestick due to the selling forces being stronger than the buying forces. The lowest point or the lowermost part of the wick in this candle indicates the price point where the future buyers are willing to buy the currency pair. Two other important things that Wide Ranging Bar candlesticks indicate are:
This volatility analysis takes place by identifying the supply and demand in the market and how it changes before any other trade signal. The changes between the supply and demand or buyers and sellers provide traders with a price range/area to take immediate price actions leading to successful trades.
The Wide Ranging Bar candlesticks also indicate and identify hidden gaps in the market's price behaviour. This means, if the Wide Ranging Bar candlesticks do not exist in a price chart, the gap between the price action before the wide range and after the wide range will be unexplained. As the Wide Ranging Bar candlesticks exist in the chart, they determine the price action between the highs and lows in the market.
Why do Wide Ranging Bars indicate different price movements for different currency pairs?
The Wide Ranging Bar strategy is applied differently to different currency pairs due to the distinct volatility of each pair. So, if you are a trader who wants to trade a major and exotic currency pair, the Wide Ranging Bar chart for both currency pairs will indicate completely different price views in the same timeline due to their differing volatilities. For example, a major currency pair EUR/USD has a narrower range than an exotic currency pair like EUR/TRY. This is because major currency pairs are less volatile than exotic currency pairs, so their price ranges also differ accordingly. The charts below depict the one-day trading price range of the major currency pair EUR/USD and the exotic currency pair EUR/TRY. The EUR/TRY chart has many more bars due to the high volatility in the market compared to the EUR/USD forex chart. Both charts are a perfect example of Wide Ranging Bars as well since there are a few wide ranging bars in both charts, identified by candles that are longer than the usual ones.
Benefits of trading Wide Ranging Bars
1. Indicates strong market momentum
As Wide Ranging Bars are longer than the usual bars/candlesticks in the chart pattern, they indicate strong market momentum for a specific currency pair. For example, a Bullish Wide Ranging Bar indicates a strong market momentum in the upward direction. In comparison, a Bearish Wide Ranging Bar indicates a strong market momentum in the downward direction.
2. Determines buying and selling interests of traders
Wide Ranging Bars' primary motive is to understand traders' buying and selling interests in the market. They indicate the demand and supply of the currency pairs in bearish and bullish markets. A Bullish Wide Ranging Bar results in an excess supply of the currency pair as more buyers convert into sellers. A Bearish Wide Ranging Bar results in excess demand for the currency pair as more sellers convert into buyers of the currency pair.
3. Identifies market reversal zones
Wide Ranging Bars indicate support and resistance levels in the market that are possible market reversals zones. These zones signal traders to make entry and exit decisions in the market. For example, when the market is bearish, and the currency pair price touches the support point, it signals traders to enter the market as prices will reverse and not fall further. However, when the market is bullish, and the currency pair price touches the resistance point, it signals traders to exit the market as prices will reverse and not increase further.
How to Trade with Wide Ranging Bars
When a trader enters the Forex market to trade with Wide Ranging Bars, they can view the currency pair prices in a consolidated format, which means that the price moves within a narrow range made up from the support and resistance levels of the market.
- The support level in the Forex market is the point where falling currency pair prices stop falling and start increasing
- The resistance level in the Forex market is the point where the rising currency pair prices stop increasing and start falling
The noise in the market, also known as the unnecessary price fluctuations that can lead to market misinterpretations, is reduced to one or two wide bars. More bars are not printed on the chart until the currency pair price range has been fulfilled and a new range is formed. This provides traders with accurate information around where the market is headed. Support and resistance areas are identified through Wide Ranging Bars during continued uptrends and downtrends.
- The support level is always identified below the current market price level and experiences maximum demand of the currency pair in the Forex market
- The resistance level is always identified above the current market price level and experiences maximum supply of the currency pair in the Forex market
- Since support level is identified during periods of excess demand, it is found in bearish Wide Ranging Bars and signals traders to enter the trade
- Since resistance level is identified during the period of excess supply, it is found in bullish Wide Ranging Bars and signals traders to exit the trade
Factors to consider when trading with Wide Ranging Bar
1. Breakout point
The breakout point is where a currency pair price goes beyond the resistance level or below the support level. The currency pairs start trending in the breakout direction and signal traders to move with the market rather than against it. For example, if the breakout occurs during a Bullish Wide Ranging Bar, it indicates traders to continue staying in the market as prices are expected to increase further. However, if the breakout occurs during a Bearish Wide Ranging Bar, it indicates traders to exit the market as soon as possible as prices are expected to fall further.
2. Climax point
Climax points occur due to the supply and demand of the currency pair. Just as it happens, the traders rush to enter a rising market or exit a falling market. Climaxes signal the end of a strong market trend. This means, in a Bearish Wide Ranging Bar, as there are more buyers than sellers in the current market, there is a selling climax that signals traders to exit the trade to mitigate losses from the falling prices. On the contrary, in a Bullish Wide Ranging Bar, as there are more sellers in the market than buyers, a buying climax signals traders to enter the trade to benefit from the increasing prices thereon.
3. Change of character point
The change of character point in the Wide Ranging Bar trading is used to identify market swings and place stop-loss orders at the right level. A trader must look for a reverse bar that closes above or below the previous Wide Ranging Bar to find out this point. Once identified, the stop loss point should be placed at or below the low price of the last Wide Range Bar during a bullish trend and at or above the high price of the last Wide Ranging Bar during a bearish trend.
Trade the Wide Ranging Bars and identify strong trends
Wide Ranging Bars are the perfect indicator of strong market trends and momentum that help traders make entry and exit decisions accordingly. With our platform, you can trade with the Wide Ranging Bars strategy along with several other strategies that assist traders in making successful market trends. Ready to give it a try? Sign up for a live trading account or try a risk-free demo account on Blueberry Markets.
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