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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.
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