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Kase Bars (Equal Truerange Bar Chart)

The document discusses Kase Bars, which are equal TrueRange bar charts that display real market gaps and signals generated from real market data. Kase Bars are superior to other equal range methods because the bars are equal true range and use only real market data. This ensures real market risks and signals are represented accurately.

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naren.bansal
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96 views2 pages

Kase Bars (Equal Truerange Bar Chart)

The document discusses Kase Bars, which are equal TrueRange bar charts that display real market gaps and signals generated from real market data. Kase Bars are superior to other equal range methods because the bars are equal true range and use only real market data. This ensures real market risks and signals are represented accurately.

Uploaded by

naren.bansal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Kase Bars (Equal TrueRange Bar Chart)

Kase Bars are equal TrueRange bars previously known as Kase Universal Bars. The Kase Bar method
creates bars with a TrueRange based on an input TrueRange target by the user, such as 10 cents, 20
points, etc., and uses only real price data. Kase Bar charts look like traditional bar or candlestick charts
except that, because the size of each bar is dictated by a target range, the bars are all approximately the
same size (range).

Kase Bars are superior to other “equal range” bar methods in two ways. First, the bars are equal true
range which counts any gaps between the previous bar’s close and the current high or low into the bar’s
range – as opposed to simple range bars, which only account for the high-low range and leave out any
gaps. Second, Kase Bars use only real data to form bars. Thus, if there are any gaps on the chart, such
gaps are shown, as opposed to filling the gap by creating bars using counterfeit data. And, if the minimum
range between two ticks exceeds the target range, the actual minimum range is shown. This is in opposi-
tion to range bar methods, which forces bars to the exact target by inserting fake data. So for example if
two sequential prices were $10.1 and $10.2, Kase’s method, using a 5-cent range, does not put in fake da-
ta but would generate a 10-cent bar, since that is as close to the target as one can get with real data. Other
methods would insert a false tick at 10.15 to break up the 10-cent bar into two 5’s.

Thus the user can be assured of three things:


1) Real market gaps will be displayed, such as breakaway, measuring or midpoint, and exhaustion
gaps which are important in anticipating market behavior, as well as patterns such as morning and
evening stars and island reversals.
2) Any signals generated by indicators will be generated by real data, by prices that actually traded
in the market, as opposed to fake data, which, by definition, would generate a fake signal, and po-
tentially an erroneous one. This is especially important in backtesting, because, while in a
backtest a fake early entry might be triggered, or a fake better stop price. In real life, since those
prices did not trade, no action could have been taken and the “signal” will always show up in the
past tense.
3) Because gaps are not filled in and bars are not broken up with fake data, the real risk in the mar-
ket, which is proportional to the real range of what actually traded, will not be masked, potential-
ly lulling the user into employing incorrect stops that trigger retroactively.

How are Kase Bars Built


As each data interval is fed in, the TrueRange of the current bar is measured. Once the TrueRange is met,
or given the data, is met as closely as possible, the bar is written.

How to Set the Target Range


There are a number of ways to set the Target Range.
1) As a guideline, the target range should be no less than three times the average difference between
ticks. So, for example, if a typical tick chart looked like this “10 – 12 – 14 – 12 – 14 – 16”, then
the average tick difference is “2” and the minimum range one would use is “6”.
2) Set up the normal time or tick volume chart you would use, such as 15 minute, 30 minute, or 610
tick, etc. Plot the Average TrueRange on that chart. Whatever the ATR is of the chart you nor-
mally use should be roughly equal to the “Target Range” you choose to input.
3) You can always just choose a range that seems appropriate to you. Visually, the bars should look
about the same size. If there is a large variation, it usually means that the target range you have
set is too small.
4) Check the Kase Bar Average TrueRange by plotting it on your Kase Bar chart. Adjust your target
up or down as necessary to result in the specific range you want.

© Kase and Company, Inc. 2016 – All Rights Reserved


How Will Kase Bars Help Me Trade?
The two major ways that Kase Bars will help you trade are 1) reduced risk and 2) cleaner signals without
the insertion of fictitious data.
1) Volatility and risk are directly related, and volatility is proportional to TrueRange. The more vari-
ation there is in the TrueRange from bar to bar, the more risk there is. Kase Bars reduce risk by
about a factor of 4, so where one might need to place a stop at $2.00 with normal time bars, with
Kase Bars, the stop may only need to be placed at $0.50.
2) Reduced false signals and signals earlier and at better prices take place with the Kase bars. In a
recent study on the Stochastic and MACD with Kase versus minute bars, it was found that Kase
bars trigger signals
a. Reduced false signals – overall, Kase Bars generated over 40% fewer false signals, that
is divergence signals that didn’t result in turns were reduced by over 40%
b. Faster signals – Kase Bars generated divergences about 50% earlier for day session
trades (so when compared with a 60-minute chart, 30 minutes sooner)
c. Kase Bars generated signals at prices 30% better- so if the Average TrueRange is $1.00,
that would be equivalent to $0.30 per signal.

For More information email askkase@kaseco.com, or contact Kase and Company, Inc. at 505-237-1600.

© Kase and Company, Inc. 2016 – All Rights Reserved

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