Candle Range Theory

The Candle Range Theory indicator provides a comprehensive trading strategy built around identifying significant market movements through candlestick size and structural analysis. It focuses on the relative range of candles compared to a higher timeframe's volatility to pinpoint high-probability breakout and reversal setups.

Usage

The indicator functions by identifying "Bulky" candles on a higher timeframe (HTF) relative to the Average True Range (ATR).

• Initial Setup: The tool monitors the breakout of either the high or low wick of a significant HTF candle, which is interpreted as a liquidity grab.
• Confirmation: After a wick breakout, the script looks for a confirmation signal in the opposite direction. For example, if the high wick is broken, the script waits for a bearish Fair Value Gap (FVG) or Order Block (OB) to form.
• Entry Execution: Users can choose between FVG or Order Block entry methods. You can also toggle the "Require Retracement" setting to ensure price returns to the zone before a signal is triggered.
• Exits: The tool provides two exit methodologies: a dynamic ATR-based TP/SL that adjusts to current market volatility, or a fixed percentage-based approach for static risk management.

Details

The Candle Range Theory (CRT) implementation relies on the relationship between price action and volatility. By filtering for "Big," "Normal," or "Small" HTF candles, the script ensures that only candles meeting specific range criteria are used as the foundation for trade setups. The integration of liquidity grabs (wick breakouts) followed by structural confirmation (FVGs/OBs) aims to align the trader with institutional order flow.

Settings

General Configuration

• Higher Timeframe: Sets the timeframe used for the primary candle analysis (e.g., M15 analysis on an H4 chart).
• HTF Candle Size: Filters which candles are considered "Bulky" based on their range relative to the ATR.
• Entry Mode: Selects between Fair Value Gaps or Order Blocks as the primary trigger.
• Require Retracement: If enabled, the price must touch the identified zone after formation for a signal to trigger.
• Show HTF Candle Lines: Displays visual markers for the high and low of the analyzed HTF candle.

Detection Specifics

• FVG Sensitivity: Controls the size and frequency of detected Fair Value Gaps (Low to Extreme).
• Swing Length: Adjusts the lookback period for identifying Order Block formations.

TP / SL

• TP / SL Method: Choose between "Dynamic" (volatility-based) or "Fixed" (percentage-based).
• Dynamic Risk: Adjusts the width of the dynamic targets to account for different asset volatilities.
• Fixed Take Profit/Stop Loss %: Sets manual percentage targets for the fixed exit method.

FAQ

How do I interpret the bulky candle detection? A bulky candle detection indicates that a candle has exceeded the selected ATR range on the higher timeframe, establishing the "range" for the current CRT setup.

Can I use this for automated alerts? Yes, the script includes built-in alerts for Buy and Sell signals, as well as Take-Profit and Stop-Loss triggers.

How do I access the Candle Range Theory indicator? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.