Intraday trading ranges naturally expand and contract over time while market players battle for directional control or when a trending security attracts a stream of buyers or sellers. These wide range bars, which print greater than average ranges at key market intersections, may confirm major price development, like a successful or failed test at a moving average.

At other times, they can signal a sharp increase in momentum , with one side giving in and allowing a trending security to surge higher or lower quickly because the friction of opposing positions has been removed from the system.

Wide Range Bar Strategy, Scan & Indicator for ThinkOrSwim

To learn more, read: A Different View Of The Markets. Moreover, legitimate breakouts and breakdowns should elicit at least one major wide range bar because the security is pushing beyond an easily observed boundary, like a trendline or horizontal resistance level. In turn, this should encourage a large number of market participants to come off the sidelines in an emotional act that yields greater than average volume.

On a related note, see: Conversely, the failure to print a high volume wide range bar during a breakout or breakdown generates a notable divergence that tells us to watch for a reversal that traps the trend-following crowd. Price movement into the 50 or day EMA creates special conditions for wide range bar signals that traders can use for timely entry or exit, depending on the outcome.

But patience is required because the testing process can unfold over many weeks, during which price bars congest while bulls and bears fight for domination. This conflict can draw multiple signals, with bars expanding away from the moving average on higher than normal volume and then reversing gears into another test.

Each expansion bar adds to an underlying theme that eventually yields either a sustained reversal that continues the trend in place prior to the test or a sustained continuation move that breaks the moving average.

The complexity of this testing process and its multiple incarnations can fool less-prepared traders who jump on each wide range bar and then get whipsawed in the opposite direction. You can improve timing with expansion bar signals by looking for a volume surge that shows high emotional levels. In addition, a 5,3,3 Stochastic indicator improves results after extended tests, with the observant trader watching for the final thrust to coincide with a bullish crossover for a rally and bearish crossover for a decline, preferably aligning with overbought and oversold levels.

An Accurate Buy And Sell Indicator. Wide range price bars often generate important signals that traders can use for timely entry or exit. Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund.

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Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. Trading The Expansion Bar Signal CBG By Alan Farley June 4, — 7: Expansion Bar Signals At Moving Averages Price movement into the 50 or day EMA creates special conditions for wide range bar signals that traders can use for timely entry or exit, depending on the outcome.

In December, it bounced at the moving average after an extended test, posting the widest range bar in two weeks on increasing volume while Stochastics printed a bullish crossover at the oversold level. In February, it completed a successful 12 day test by gapping above the moving average on the highest volume in 8 sessions and posting the widest intraday range in 3 weeks, while Stochastics again printed a bullish crossover at the oversold level.

In March, it ended a 6 week consolidation on top of the moving average with the widest range bar of while Stochastics jumped into the overbought level in a "Stochastics Pop" buy signal, popularized by Jake Bernstein in his book: The Compleat Day Trader.

Bottom Line Wide range price bars often generate important signals that traders can use for timely entry or exit. While range bars are not a type of technical indicator, traders can employ this useful tool to identify trends and interpret volatility.

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Understand what makes a bar successful and what is important about opening a bar.

Learn about the top five cities to open a bar in the United States. Weekly Stochastics uncovers patterns of buying and selling pressure that can be predicted and capitalized upon by observant investors and traders. Find out how to buy gold bars, including tips on evaluating purity, form, size and authenticity of the purchase. You may be missing some key statistics when following charts in the market.

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