Candle Range Theory (CRT)

Jul 7, 2024

Candle Range Theory (CRT)

Introduction

  • CRT = Candle Range Theory
  • Comprehensive guide for dedicated learners
  • Related to 9 AM CR model
  • Concepts from Romeo but independently implemented

What is CRT?

  • A foundational theory in trading candle models
  • Generally presented as a three-candle model but not restricted to it
  • Involves forming a range with candles and trading based on this range
  • Two CRT models:
    1. Three candle model
    2. CRT Plus Inside Bar model (higher probability)
    • Multiple candles to hit the range extremes

Basic CRT Structure

  1. First Candle: Forms the high and low of the range
  2. Second Candle: Manipulates the range (typically wicks below or above)
  3. Third Candle: Distributes towards the opposite end of the range

Characteristics of CRT

  • Mechanical and predictable, similar to a signature in the market’s code
  • Highs and lows of all timeframes (weekly, daily, etc.) are predetermined
  • Can be combined with other trading concepts for higher probability

Examples

  • Numerous examples provided to illustrate range formations, inside bars, and turtle soups

Key Components

  • Range: Defined by the high and low of a specific time candle
  • Turtle Soup: Manipulation candle that wicks below or above the range
  • Distribution: The third candle that moves to the opposite end of the range
  • Inside Bar: A candle within the range formed by the first candle

Power of Three

  • Represent three stages of price delivery:
    1. Accumulation
    2. Manipulation
    3. Distribution
  • Each stage has its own function
  • Crucial for understanding and utilizing CRT

Time and Fractals

  • Every timeframe has fractal properties
  • Higher timeframes influence lower timeframes and vice versa
  • Specific times of day are more critical for high probability setups

Entry Models

  • Different entry points based on CRT:
    1. Turtle Soup
    2. Order Block
    3. Market Structure Shift
    4. Breaker or Optimal Trade Entry (OT)

Order Blocks

  • High-probability when involving thick, heavily closed candles
  • Thick candles often fool traders into the wrong direction

Combining CRT With Other Factors

  • Utilize higher time frame key levels (divide by four rule)
  • CRTs plus inside bars for better setup filtration
  • Focus on the most suitable trading ranges for your strategy

High Probability CRT Setups

  • Recommended ranges and times for Forex and Futures
  • High probability Turtle Soups (e.g., 3 AM, 6 AM, 9 AM, 1 AM)

Psychological Aspects

  • Importance of patience and selective trading
  • Filtering trades and focusing on A+ setups exclusively
  • Set and maintain your risk-reward ratio
  • Psychological perseverance and discipline make a significant difference

Key Points for Study

  • Study and back-test to internalize CRT principles
  • Repetition is crucial
  • Focus on understanding fractal nature and specific timeframes
  • Always take partial profits at the midpoint of the range to secure gains

Conclusion

  • CRT is a powerful trading concept
  • Spend time mastering CRT concepts for trading success
  • Part three of the 9 AM CRT model will be released soon

Additional Notes

  • Turtle Soup: Always involves wicking below/above, not closing
  • Midpoint of ranges are primary points for entry and reversal
  • Focus on understanding mechanical nature and time-specific entries for consistent trades
  • Always back-test and use higher time frame key levels for precise trading