Description:
The candle range indicator calculates the average size of both the candle's wick (the difference between the high and low) and body (the difference between the open and close prices) over a specified period of time. This provides traders with information about the typical price movement within that time frame, aiding in their analysis and decision-making process. This is a powerful indicator that can be used in conjunction with other indicators to find where prices are moving outside of an average range.
Input Parameters:
- MA Type: Select the moving average type such as EMA, SMA, or HullMA.
- Length: Number of periods used in the calculation.
Use Cases:
- Volatility Analysis: Traders use the candle range indicator to assess market volatility. Higher average ranges indicate increased volatility, suggesting potentially larger price movements and greater trading opportunities. For example, a trader might use this information to adjust their position sizing or risk management strategies to account for higher volatility periods.
- Identifying Trend Strength: By analyzing the average size of candle bodies relative to their wicks, traders can gauge the strength of a trend. A series of candles with small bodies and long wicks may indicate indecision or potential trend reversals, while candles with large bodies and short wicks suggest strong directional movement. Traders may use this information to confirm trends or anticipate reversals.
- Setting Stop Loss and Take Profit Levels: Understanding the average candle range can help traders determine appropriate stop loss and take profit levels for their trades. For instance, in a highly volatile market with large average candle ranges, traders may set wider stop-loss orders to avoid being prematurely stopped out by market noise. Conversely, in a low volatility environment, tighter stop loss levels may be sufficient to manage risk effectively.
This feature can be used in:
- Market Scanner
- Strategy Tester
- Multi-Factor Alerts
- Smart Checklist
Do you want to learn more? Check out our blogpost.