This article covers both the Ultimate Tick Bars and the Ultimate Renko Bars. Bars are a big deal and many traders do not realize the impact of how their data is organized on their trading. Bars ARE data organization and in the intraday timespace UTBs and URBs are king. No trading arsenal is complete without them. The UTBs are a detail revealing bar and the URBs are a superb trend and pivot filter. Enjoy this review and as always, if you have any questions feel free to contact Rob.
How data is organized can have a huge impact on the result you get. Some ways of organizing data can help you to see things better, can reduce things like whipsawing, or can help you to identify trend better and in various ways. One way of organizing data that just cannot be done in other trading platforms other than Ninja Trader is through the use of different custom bar types.
There are currently several types of bars in existence and a few different styles. Distinguishing between these is helpful. In the style department, you can plot things as a dot, line or bar for example. Most common is the bar chart where the open, high, low and close are used to define price action inside an interval. Then, there is a special type of style called candlesticks which uses colors and a graphic boxing of the open to close relationship that makes seeing certain patterns in the bars easier to the eye. There are other styles of bars, but we won't go into that area for now.
There are a couple of different bar types. There are volume related bars such as tick or volume (sometimes called share bars), there are time based bars such as minute, daily weekly monthly bars etc. and then there are range based bars (this has to do with the height or range of the price bar).
By organizing the data to make price bars into certain types (various computations) of chunks of volume or range, we can often make price alternation seem obvious that would otherwise be areas of congestion.
In order to make this clearer, let's take a look at the Ultimate Tick Bars and see the advantages. Following this, I will cover the Ultimate Renko bars, which are a type of data organization scheme that deals with Range; one works on Volume, the other on Range.
There are several reasons to use Ultimate Tick Bars- Pure and simple over traditional tick bars. They are also even more superior in my opinion to minute based bars.
1) There is a purposeful relationship between the interval of an Ultimate Tick Bar and price movement. The count of ticks on which traditional tick bars are based is non-directional. This means the traditional tick bar is constant regardless of market direction. Ultimate Tick bars, on the other hand, are directional.
- As the market trends, it will generate more bars than traditional , effectively smoothing the bars in trending situations.
- As the market consolidates, Ultimate Tick Bars will generate fewer bars than traditional tick bars. This will in many cases generate fewer whipsaw trades while the market is in consolidation than other bar types.
- Further, Ultimate Tick Bars, unlike traditional tick bars, will tend to close near their lows in a down trend and near their highs in an uptrend, generally having tails in the direction of the counter-trend. This can make it possible to analyze the strength of a trend based on individual bar characteristics. Additionally, it can make candlestick analysis more meaningful.
2) There is a strong relationship between the price movement in price bars and the count of ticks within the bar. Because of this, on Ultimate Tick Bars, you can make very specific cause and effect relationship determinations simply by glancing at a chart. This is true because no other type of bar shows you a specific measure of market pressure that is directly correlated to the range of the bar.
- Markets in breakout will tend to have large bars per unit of ticks
- Markets that are trending will tend to have smaller bars
- Markets where a bar breaks out of a cluster can have a higher reliability of sustaining the breakout.
Because of the various relationships in the above categories, Ultimate Tick Bars are an excellent choice to add to your trading arsenal.
If you like line break bars, Ultimate Tick Bars are also an excellent form of line break analysis.
Minute based chart:
The above minute based chart has a period in time that runs close to half the chart (from 7:30 to about 8:30) with a relatively small amount of price movement and then breaks lower. Traders of minute based bars, may have been lured into trading during this interval, especially since the congestion area was taking a large portion of the scale of their chart. In contrast, let's look at a traditional Tick bar chart over the same interval:
If you compare these charts, you will see the consolidation area was compressed in the volume based (Tick) chart. There were fewer bars during this interval because there was no volume to move price. As a result, there were fewer bars and price action was a bit clearer. As the market began to trend, the tick chart did not have elongated bars, rather the trending bars became smoother with fewer abrupt changes in price. Many traders like these types of (Tick) bars because they are 1) smoother, 2) more predictable, and 3) predict turns in the market more consistently than time based bars. Now let's take a look at Ultimate Tick Bars:
As you can see, UTBs are even smoother and more predictable that traditional Tick bars. This is true because they are designed to generate more bars as the market trends. This has the effect of elongating the chart in the time domain during periods of trend (something that may have even been opposite on time based bars, but that was improved somewhat with traditional tick bars). Take a look at the time period from 8:57 to right around 9:05. During this interval, UTBs generated 14 bars. Traditional tick bars generated 8. So during a period of trend UTBs generated almost twice as many bars during a trend.
This same phenomenon also applies to areas of congestion. For example, in the interval from the low just after 9:26 the traditional Tick bar chart generated 6 bars of congestion. The UTB generated only 3. So, UTBs may generate twice as many bars in a trend and half as many in consolidation when compared to a tick chart with a similar compression (number of bars in a certain length of time).
In the analysis of breakouts, the UTBs can also give a little better analysis. This is true because the UTBs will often make a large bar at the beginning of a breakout. This occurred at just after 9:17 and 9:30. In this manner, UTBs have qualities of Line Break bars.
For more, you can analyze the above charts some more with reference to the above originally stated 6 points. For example, the fact that the bars tend to close at their lows in downtrends with candlestick tails only pointing in the opposite direction to the trend etc..
Because of the (purposeful) relationship between volume and price movement all in one bar, UTBs are a powerful way of analyzing volume price relationships and to identify areas on a chart where a lot of traders are trapped etc..
OK. Let's take a look at the Ultimate Renko bars over the same interval:
As you can see, Renko bars have some very similar qualities to the properties we have already discussed with UTBs, but they are purely range based bars. They cannot tell you things about buying and selling pressure like UTBs can, but there are other advantages.
Because URBs are based purely on price action they are a great way of managing risk. This is true because each bar has a set number of ticks in the direction of the bar beyond the previous bar. What this means is, simply by glancing at the chart, I can see how many ticks of price movement has transpired. This makes it possible for me to trail very tightly and very fast in a moving market in areas of price movement that traders using traditional tick and minute based bars cannot even see.
I can also see at which exact point the trend will reverse and can set the parameters of the bars to whatever level I choose to trade at. In this way, URBs are a complete trading system for scalping and short term trend oriented traders. You will note there are a few settings on the bars in the above screenshot. Each of these is entirely customizable, making these bars the most powerful Renko bars you can buy; a significant advantage in my opinion.
In the interval just after 8:44 there are 16 consecutive red bars. Each of these is 4 ticks of price movement. So, I can tell just by looking at the chart, this is 64 ticks of movement (or $640 per contract in this market). As you can see, this price movement is not only sustained, but extremely clear. The minute based chart was highly variable in this interval making the move in price very unclear. The traditional tick chart was a bit better. The UTB was also very clear but was based on entirely different information.
There is another way (both) these custom bars would have helped you to identify you were in a trend. The rate of new bar creation was high in the types of bars we are reviewing because both, there was volume behind the move UTBs and price range expansion URBs.
Lastly the URBs have a reversal size. Here I am set to 120% (look at the top of the URB chart). This means the bar will not allow a reversal until it has gone one tick more than the set 6 ticks (120% of 6 ticks is 7 ticks). This can help to keep you out of false reversals. So, you have a custom bar that has complete user control of the bars parameters for trend and reversal; very powerful to say the least.
In the above, I have put a simple 14 period moving average to help make it clearer and easier to compare the bars on the charts and their relative movements.
As I had mentioned in the beginning of this review, the way you organize data can have a large impact on the result you get. When I first began intraday trading. I simple could not understand how other traders were able to consistently trade inside me. I now know they were able to do this because they are using similar techniques to what I have shown you in the above review.
In addition to the benefits you can get by using custom bars, you can step up to even more advanced trading by using the above bar types with Nindicator trading tools.
Because I like these bars so much, I have negotiated special pricing for blog followers who would like to use these bars in their trading. To purchase these bars simply Click Here
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