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Tuesday, December 18, 2012

Small Range Setup

New Setup : Small Range

This is an old setup focused to trade trending and/or impulsing markets in the direction of the trend.
The Entry Type uses Stop Orders as it is intended for fast volatile never returning markets like crude oil or gold.
This setup uses the following Tools :
  • A slow Moving Average to define the Trend (blue line)
  • An envelope around a fast moving average to define the trade / no-trade condition
  • A channel to verify that the entry bar is making an extreme of the move
  • A tool to calculate the range of the bar ( not used on range bars)
When the blue line is all outside the envelope, the setup has a trend. Otherwise it is in neutral state ; gray bars = do nothing.
If we have red bars and current bar is touching the upper channel, then we have a possible short entry.
When not using range bars we can add another condition ; signal bar must be of small range ;

The short entry is a Sell Stop some ticks below signal bar ( usually 2 to 3 ticks ).
If at next bar we have a better entry we move the order to new place, like on example above.
Once the entry is filled, the stop should be placed some ticks above the signal bar.
Using range chart is easy for this setup because the stop is a fixed value ; the range of bar + 2 times the offset. On a 9 range CL chart using 3 ticks as offset, the stop is 15 ( 9 + 2 x 3 )
I have a developed a special indicator for this setup on


  1. Comment via email :
    On the small range indicator.... how can that work with a range bar chart... Its not calculating a smaller range? It seems there must be another parameter such as reduced volume to trigger a signal, and if so , is it used on tick, time, volume and range charts the same?
    The answer is that we look for 3 conditions ;
    1) trend line outside envelope
    2) bar touching channel ( making new high for short , or making new low for long)
    3) range of bar is small
    We ignore condition 3 on range bars
    ..on the indicator, we have a max_range value, so we can use any number bigger than current timeframe....

  2. Pablo,

    Do you use this indicator in a room where we can watch it on a daily basis before purchase?


    1. I will be starting a trade room on January, explaining setups and trading them live...
      I am scheduling 1:1 webinars to explain in detail all your questions until the room is ready...

  3. This is a setup I really like beacause it lets me trade pullbacks in a trend.It is also simple to execute - which is quite important to me.

    With some backtesting I decided to add a simple filter - the setup bar must touch or be near the 50 EMA.This way you will miss some winners, but it will also filter out quite a few losers.You also get very high quality trades with a lot of potential for runners.

    My favorite timeframes is TF 500 tick and the FDAX 50 tick ( in the European session )


    1. This is an excellent idea, in fact something to take into account is that we are trading the main trend line, not perfect bounces but any pullback near it will produce signals. So the closer to it the better the signal.
      I use the 50 EMA on Range 9 CL as main trendline.

  4. This is a youtube video link :
    showing how to use the indicator and some live trading examples..