What Are Range Candles?

Introduction

Range candles are a type of candles based on price action. Analysis of range candles can be interesting because their creation will align with traders’ PnL. Additionally, volume analysis on range candles can provide early signals about the formation of trends.

Formation

Range candles close after the price of the asset moves by a certain amount. Range candles are always based on the quote currency. This price range is calculated in two ways: % and notional. Additionally, the starting value of the range can be set as the open price, or high / low price.

Notional Range Candles

Notional range candles close after the asset price moves a fixed amount measured in quote currency. For example, 1k notional change candles on BTC/USD will close after the price moves 1000 USD.

% Range Candles

% range candles close after the asset price moves an amount in % terms. Example: range is 10% and starts at 1000. The candle will close when a trade executes above 1100 (+10%) or below 900 (-10%). As price rises, candles will get bigger in notional terms. As price falls, candles will get smaller in notional terms.

Range Starting Values

Ranges can be calculated starting from the open price, or the high / low price. Examples use notional range candles.

A range calculated from the open price is straightforward. If the change required is 100, and a candle opens at 1000, then the candle will close when the next trade trades above 1100 or below 900.

A range calculated from the high / low price is slightly more complicated. Example: the change required is 100 and a candle opens at 1000. If the price falls to 950 and then rises, the candle will close when a trade is higher than 1050. If instead, the candle opens at 1000 and only goes down in price, the candle will close at 900 because the high is equal to the open price.

Comparison to Time Candles

Range candles have an advantage over time candles because they are based on change in price of an asset, rather than an arbitrary amount of time. Candle generation will correlate strongly with open positions in terms of PnL. Additionally, volume analysis can be significantly more accurate with range candles.

Volume Analysis

Volume analysis can be an important component of trading with range candles. Since each candle is equivalent in terms of price action, momentum can be easier to analyze. Range candles with low volume can indicate the change in price doesn't have momentum to continue. Conversely, range candles with high volume can indicate the start or continuance of a trend.

Cryptick's Range Candles

Cryptick fully supports range candles with change calculated in % and notional terms. Additionally, these candles are generated from trade data, which is an improvement over existing implementations (which guess based on time candles). A full suite of technical indicators is also available.

Conclusion

Range candles can be a great addition to a trader’s arsenal when they are properly generated. The ability to perform volume analysis on candles based on price action will differentiate traders from traditional trading methods, which may lead to considerable gains.