Candle Range Theory | CRT | The NEW Silver Bullet For Struggling Traders

PJ Trades

21 Apr 202411:29

Summary

TLDRThis video script delves into the concept of candle range theory in trading, emphasizing the importance of understanding each candle's range, from one-minute to four-hour intervals. It highlights three key aspects of an A+ range: inside candles, price action resting above or below, and specific time-based ranges. The script uses examples to illustrate how to identify market liquidity, opening prices, and the narrative behind each algorithmically printed candle. It encourages viewers to apply these insights to their own trading charts for a more strategic approach.

Takeaways

📊 Candle Range Theory is about understanding the range of each candlestick chart, including the highs and lows within specific time frames.
🔍 Key aspects of an A+ range include inside candles, price action (PDA) resting above or below, and the specific time frame of the range.
⏱ Time frames can vary, such as Asia range, daily range, or 4-hour range, and are crucial for identifying liquidity and market movements.
📈 Each candlestick represents a range with an opening price, high, low, and closing price, indicating the market's sentiment during that period.
💡 Candlesticks are not random; they are algorithmically printed with a narrative, suggesting that patterns can be analyzed and understood.
🔑 Inside bars are significant as they indicate accumulation and potential market reversals or continuations.
📉 An order block can be created by identifying the range low and high, which can be used for entry and exit points in trading.
🚀 Observing the opening, low, high, and closing prices of candles can provide insights into potential market direction and bias.
📌 Each candlestick has a 'power of three', which may refer to the importance of the opening, high, low, and closing prices in analysis.
📉 The concept of 'time-based premium and discount' is introduced, suggesting that the value of a candlestick can change based on its position within its time frame.
📚 The presenter encourages viewers to apply these concepts to their own charts for a deeper understanding and practical application.

Q & A

What is the core concept of candle range theory?
-The core concept of candle range theory is that each candle, regardless of its time frame (1 hour, 4 hours, etc.), represents a range with a high and a low, and it's essential to understand where liquidity is resting and the opening price.
What are the three key aspects of an A+ range according to the script?
-The three key aspects of an A+ range are: inside candles specifically in a higher time frame, PDA (Price Discovery Area) resting above or below, and the specific time the range is occurring (e.g., Asia range, daily range, or 4-hour range).
What does 'PDA resting above or below' refer to in the context of candle range theory?
-In the context of candle range theory, 'PDA resting above or below' refers to the Price Discovery Area being positioned either above or below the range, indicating where the market is finding value and potential support or resistance levels.
How does the speaker describe the formation of each candle in the market?
-The speaker describes each candle as being algorithmically printed with a narrative behind it, implying that there is no randomness in the formation of candles and that each one carries specific information about market sentiment and activity.
What does the term 'inside bar' signify in the context of the script?
-In the context of the script, an 'inside bar' signifies a candle that is completely contained within the previous candle's range, which can indicate accumulation or a period of consolidation in the market.
What is the significance of understanding the 'opening price' in relation to candle range theory?
-Understanding the 'opening price' is significant because it helps in identifying potential entry and exit points for trades. It's used to determine if a market is opening at a premium or discount and can influence trading strategies.
What is the concept of 'sweeping the range low or high' mentioned in the script?
-The concept of 'sweeping the range low or high' refers to the market price moving past the previous low or high of a candle's range, which can indicate a potential shift in market sentiment and may present trading opportunities.
How does the speaker suggest using the daily candle range in trading?
-The speaker suggests using the daily candle range to identify key support and resistance levels, and to look for patterns such as inside bars or accumulation areas that could indicate potential market movements.
What is the importance of recognizing 'fair value gaps' in candle range theory?
-Recognizing 'fair value gaps' is important as they can indicate significant shifts in market sentiment or the presence of large orders. These gaps can provide insight into potential market direction and areas of interest for traders.
How does the speaker define the 'power of three' in the context of each candle?
-The 'power of three' in the context of each candle is not explicitly defined in the script, but it could refer to the three key elements that give each candle its significance: the opening price, the high, and the low.
What is the role of 'narrative' in the formation of each candle according to the speaker?
-According to the speaker, the 'narrative' behind each candle refers to the underlying reasons and market conditions that lead to its formation. It suggests that each candle's creation is not random but is a result of specific market dynamics.

Outlines

00:00

📈 Introduction to Candle Range Theory

The speaker introduces the concept of candle range theory, emphasizing its simplicity at its core. They explain that each candlestick, regardless of its time frame (1 hour, 4 hours, etc.), represents a range with high and low points. The theory also involves identifying where liquidity is resting and the opening price. Three key aspects of an 'A+ range' are highlighted: inside candles on a higher time frame, price action (PDA) resting above or below, and specific time-based ranges such as daily or Monday ranges. The speaker also discusses the importance of recognizing the power and narrative behind each candlestick, which are algorithmically printed and not by chance. Examples are given to illustrate single candles as ranges and how higher time frames can become lower time frame ranges, using the daily candle on the Euro as an example.

05:02

📉 Analyzing Market Structure and Entry Points

This paragraph delves into analyzing market structure using candle range theory, focusing on identifying entry and exit points. The speaker describes how to use the opening low and high of the 4-hour candle to create an order block and discusses the significance of sweeping the range high and low. They mention the importance of recognizing support and resistance levels, fair value gaps, and market structure shifts. The speaker provides an example of how to catch the open, low, high, and close of a candle, and how to use these to form a bias for future trades. They also touch on the concept of time-based discounts and premiums associated with each candlestick, urging viewers to apply these concepts to their own chart analysis.

10:06

📊 Key Aspects of Candle Range Theory and Practical Application

The speaker wraps up the discussion by summarizing the three key aspects of candle range theory: identifying inside candles, recognizing price action resting above or below, and understanding specific time ranges. They stress the importance of considering each candle's range, open low/high, and close high/low. The speaker also highlights that each candle has its own time-based premium and discount, and each is algorithmically printed with a narrative. They encourage viewers to study and apply these concepts to their trading, hoping that the information provided will be beneficial and enhance their understanding of market dynamics.

Mindmap

Keywords

💡Candle Range Theory

Candle Range Theory is a method used in technical analysis of financial markets, focusing on the range of price movements within a specific time frame represented by each candlestick. In the video, it is the central theme, with the speaker discussing how each candle, whether it's a 1-hour, 4-hour, or daily candle, has a range high and range low, which are critical for understanding market dynamics.

💡Liquidity

Liquidity in the context of financial markets refers to the ease with which assets can be bought or sold without affecting their price. In the video, the speaker emphasizes the importance of identifying where liquidity is resting, which is crucial for understanding the support and resistance levels within the candle range theory.

💡Opening Price

The opening price is the price at which trading begins for a given asset at the start of a trading session. The script mentions the significance of the opening price in relation to the range high and range low, indicating how it can be used to predict market movements and identify entry and exit points in trading.

💡Inside Candle

An inside candle is a candlestick pattern where the entire body of the current candle is contained within the body of the previous candle. In the video, the speaker uses inside candles as an example to illustrate how higher time frame patterns can influence lower time frame ranges, indicating potential market reversals or continuations.

💡PDAs (Price Action)

Price Action (PDAs) refers to the movement of an asset's price over time, which traders analyze to make trading decisions. The speaker in the video discusses how PDAs resting above or below certain levels can indicate market sentiment and potential trading opportunities within the candle range theory.

💡Time Frame

Time frame in trading refers to the duration over which a particular price action is observed, such as 1-hour, 4-hour, or daily. The video script explains how different time frames can have different ranges and how understanding these can help in making trading decisions based on candle range theory.

💡Range High and Range Low

Range High and Range Low are the highest and lowest prices reached by a security within a specific time frame. The script uses these terms to explain how to identify the boundaries of price movements within each candle, which is fundamental to candle range theory and making informed trading decisions.

💡Order Block

An order block is a level at which a significant number of buy or sell orders are placed, often acting as a psychological barrier for price movement. The speaker in the video describes how order blocks can be identified and used in conjunction with candle range theory to predict potential market reactions.

💡Fair Value Gap

A fair value gap is a price level that traders perceive as a reasonable or fair price for an asset. In the script, the speaker mentions fair value gaps in the context of identifying market structure shifts and potential re-entry points for trades based on candle range theory.

💡Bias

Bias in trading refers to the overall direction or trend that the market is expected to take. The video script discusses how forming a bias can help traders understand the market's direction after certain price actions, such as breaking through range highs or lows within the candle range theory.

💡Algorithmic Printing

Algorithmic printing refers to the process by which trading algorithms generate the price data that forms the candlesticks on a chart. The speaker emphasizes that each candle is not random but is algorithmically printed with a narrative, suggesting that understanding these narratives can provide insights into market behavior.

Highlights

Introduction to candle range theory for a simple understanding of market movements.

Each candlestick, regardless of time frame, represents a range with high and low points.

Key aspects of A+ range include inside candles, liquidity resting points, and specific time frames.

Understanding the opening price and where liquidity rests is crucial for trading decisions.

Candlestick analysis involves recognizing patterns like inside bars and accumulation areas.

Market movements are not by chance; each candlestick is algorithmically printed with a narrative.

Examples of single candles being a range and higher time frame becoming a lower time frame range.

Analyzing daily candles for inside bars and accumulation to predict market movements.

Importance of observing the order block and resistance levels within candle ranges.

Using the range low and high to make informed trading decisions.

The concept of time-based premium and discount in relation to candlestick analysis.

Identifying market bias and potential re-entry points after analyzing candlestick patterns.

The significance of the opening, low, high, and closing prices within each candlestick.

Applying candle range theory to 4-hour candles for trading strategies.

Recognizing market structure shifts and using them to inform trading decisions.

The importance of each candlestick having a power of three and its own time-based premium and discount.

Encouragement to study and apply candle range theory to personal trading charts.