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Range
Indicator
Description
The Range
Indicator was developed by Jack Weinberg.
It was introduced in the June 1995 issue of
Technical Analysis of Stocks & Commodities
magazine. Mr.
Weinberg developed this indicator based on his
observation that changes in the average day's
intraday range (high to low) as compared to the
average day's interday range (close to close)
precede the start of a new trend or the end of the
current trend.
Interpretation
The
Range Indicator shows when the intraday high to
low ranges exceed the interday close to close
ranges.
This
approach proves useful in identifying the start
and end of trends.
When the intraday ranges are dramatically
higher than the interday ranges, the market is
considered "out of balance," and the
Range Indicator will be at a high level.
When at a high level, look for the current
trend to end. Conversely,
when the Range Indicator is at a low level (below
20 for example), look for the emergence of a new
trend.
Mr.
Weinberg found that the Range Indicator improves
many momentum and trend-following trading systems.
For example, he found that the results of a
basic two moving average crossover system on the
four major currencies were dramatically improved
by filtering the signals with the Range Indicator.
By waiting to enter a long position until
the Range Indicator crossed above a defined low
level and then waiting to exit until the indicator
crossed above a defined high level, profits,
number of trades, and risk were dramatically
improved. |
