Introduction to the Forecasting of Price Ranges Indicator
The Forecasting of Price Ranges Indicator is a technical trading tool which can help traders anticipate the price level where the market may move towards within the next few candles. This can help traders project where to set take profit targets when trading short-term momentum.
What is the Forecasting of Price Ranges Indicator?
The Forecasting of Price Ranges Indicator is a custom technical indicator which provides traders an indication of the potential price range of the next candle.
This indicator draws a vertical rectangle plotted as a background to the candles. In this template, the indicator plots a dodger blue background box. This background box indicates the potential price range of the latest candle as it develops.
The vertical boxes that this indicator plots tend to be longer when the prior candle is long and shorter boxes if the prior candle is short. It also tends to project the range in the direction of the previous candle. If the previous candle is bullish, the range is shifted up. If the prior candle is bearish, then the range is shifted down.
How the Forecasting of Price Ranges Indicator Works?
The Forecasting of Price Ranges Indicator has a simple algorithm which projects price ranges based on whether the previous candle is bullish or bearish. In each case, the indicator has different formulas for forecasting the price range. These formulas are based on the open high low and close of price.
If the close price is lesser than the open price, then it calculates as follows.
x = (High + Low + Close + Low) / 2
If the close price is greater than the open price, then it calculates as follows.
x = (High + Low + Close + High) / 2
If the close price is equal to the open price, which forms a doji, then it calculates as follows.
x = (High + Low) / 2
The x value would be the starting point for the vertical rectangle. It would then subtract either the high of price or the low of price depending on whether the previous candle is bullish or bearish.
How to use the Forecasting of Price Ranges Indicator for MT4
The Forecasting of Price Ranges Indicator has just a couple of options which can be modified within its indicator settings.
“colir” allows users to modify the color of the vertical rectangle that the indicator plots as a background to represent the price range.
“barsToProcess” allows users to set the number of candles that the indicator would process from the historical price feed and plot vertical bars on.
Conclusion
The Forecasting of Price Range Indicator can be a useful technical indicator. It allows traders to anticipate the price point that the market may reach based on the range of prior candles. This is useful for traders who are trading short-term price movements lasting for just a few candles. However, because of its short-term range, this indicator may not always be very reliable in anticipating price ranges. Traders may also use other technical indicators such as the Average True Range (ATR) to detect longer-term price ranges.
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