Pip range bar charts were designed by Vicente Nicolellis, a Brazilian broker and trader, in 1995. He wanted to solve the problem of handling the extreme volatility of local markets and finally decided that the best way to achieve this was to take time out of the equation, focusing solely on price. This is similar to a point and figure charts approach, where only price changes are recorded.
Constant ranges are used to define the bars or candles. Usually, you can find ranges of 8, 10, 15, 20, and 30 pips. A new bar is opened as soon as that range has been covered and the price opens higher or lower, starting a new range with the same pip value. You can apply to these charts the same indicators you would on normal bar or candlestick charts.
These charts are particularly interesting when you are facing a stalling market, where there is a long congestion of prices, which in a normal chart would be reflected in several short-bodied bars or candles. In this way, attention can be focused on the essential changes in price itself, taking out the usual noise of sideways markets. When a range is complete, a new bar opens independent of the time. You could have a single bar for a whole day of trading if you are using a 30-pip range and the price hasn't gone over or under that range for the duration of the day. As soon as the market goes over the 30-pip range, a new bar will open, starting at the closing level of the preceding bar, and the 30-pip range will have to be completed again to allow a new bar to open later on. Conversely, if the range is covered in a few minutes and the price keeps going in a fast move, you will have several 30-pip range bars or candles showing those changes.
Was this article helpful?