Discussing the article: "Price Action Analysis Toolkit Development (Part 33): Candle Range Theory Tool"

 

Check out the new article: Price Action Analysis Toolkit Development (Part 33): Candle Range Theory Tool.

Upgrade your market reading with the Candle-Range Theory suite for MetaTrader 5, a fully MQL5-native solution that converts raw price bars into real-time volatility intelligence. The lightweight CRangePattern library benchmarks each candle’s true range against an adaptive ATR and classifies it the instant it closes; the CRT Indicator then projects those classifications on your chart as crisp, color-coded rectangles and arrows that reveal tightening consolidations, explosive breakouts, and full-range engulfment the moment they occur. 

olatility is the market’s primary language. Before any oscillator turns, before most trend-following filters react, price has already expressed a clear opinion through the simple distance it travels within a single bar. A sudden range expansion often indicates aggressive participation from large players; a prolonged contraction suggests liquidity is being withdrawn anticipating the next move.  Likewise, a bar that stays entirely inside its predecessor reveals temporary indecision, whereas a bar that engulfs the previous range reflects decisive order-flow. These behaviors are apparent yet rarely formalized into a robust, machine-readable process.

This article presents Candle-Range Theory (CRT), a concise framework that classifies every completed candle into one of four mutually exclusive categories:

  • Large-Range (LR) – the candle’s true range exceeds a configurable multiple of its recent Average True Range (ATR).
  • Small-Range (SR) – the candle’s range is smaller than a lower multiple of ATR, signaling compression.
  • Inside Bar (IB) – the entire candle remains within the high–low boundaries of its immediate predecessor.
  • Outside Bar (OB) – the candle breaches both the prior high and low during its lifespan, engulfing the earlier range.

Author: Christian Benjamin