I’d like to share an indicator I came up with that I found very useful over the years. It’s actually a very simple one but it proved itself against over and over again against much more complicated indicators that try to do the same thing. I surely wouldn’t want to miss it.
Here’s the formula: abs(open-close)/(high-low) * 100
Which gives us a value between 0 and 100 that measures the actual price change of a single price bar (absolute value of open-close) against the whole price bars range (high-low). Or in Candlestick charting language: measures the size of the candle body against the whole candle including the wicks.
Let’s look at a price chart to make this more clear:
The blue bars are showing the Daily BarStrength of Gold for each of the price bars/candles. Below you can find a 5 period EMA of that BarStrength. Notice that huge green candles that open nearby the low and close nearby the high show a high BarStrength score (50+) while candles that close near the open have a very low score.
So what you might wonder. Well here’s the interesting part: Notice that quite often you’ll get a strong price bar/candle after a weak one and the other way around. To highlight this I’ve plotted a horizontal line at 33.
The same is true on a larger scale looking at the moving average below. When it’s showing low values, meaning there’s been hardly any real price change in Gold for a couple of days, there’s a tendency for big moves to happen afterward.
I’ve found this to be true in many markets, Gold is just an example. While this works in principle on any timeframe, it’s most effective on higher timeframes like daily and weekly charts.
The BarStrength indicator doesn’t show you in which direction the market will move. But knowing when a market is more likely to make a big move than not can make a really huge difference in your trading results. This is why I like to use this as a filter for breakout strategies, like ORB (opening range breakout) strategies for example.
Happy Trading!
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
Editors’ Picks
EUR/USD holds steady below 1.1800
EUR/USD moves sideways in a narrow channel below 1.1800 as the market volatility remains low ahead of the New Year holiday. On Tuesday, investors will pay close attention to the minutes of the Federal Reserve's December policy meeting.
GBP/USD retreats below 1.3500 as trading conditions remain thin
GBP/USD corrects lower after posting strong gains in the previous week and trades below 1.3500 on Monday. With the action in financial markets turning subdued following the Christmas holiday, however, the pair's losses remain limited.
USD/JPY steadies above 156.00 following BoJ’s Summary of Opinions
The US Dollar is ticking lower against a moderately firmer Japanese Yen on Monday, yet with downside attempts contained above 156.00. The positive impact from the hawkishly-tilted Summary of Opinions of the Bank of Japan’s (BoJ) Monetary Policy Meeting seen during Monday’s Asian session has waned during London trading.
Editors’ Picks
EUR/USD holds steady below 1.1800
EUR/USD moves sideways in a narrow channel below 1.1800 as the market volatility remains low ahead of the New Year holiday. On Tuesday, investors will pay close attention to the minutes of the Federal Reserve's December policy meeting.
GBP/USD retreats below 1.3500 as trading conditions remain thin
GBP/USD corrects lower after posting strong gains in the previous week and trades below 1.3500 on Monday. With the action in financial markets turning subdued following the Christmas holiday, however, the pair's losses remain limited.
Gold extends correction from record-high, trades below $4,400
Gold retreats sharply from the record-peak it set at $4,550 and trades below $4,400, losing more than 3% on the day. Growing optimism about a Ukraine-Russia peace agreement and profit-taking ahead of the New Year holiday seem to be causing XAU/USD to stay under heavy bearish pressure.
Bitcoin, Ethereum, and XRP bulls regain strength
Bitcoin, Ethereum, and Ripple record roughly 3% gains on Monday, regaining strength mid-holiday season. Despite thin liquidity in the holiday season, BTC and major altcoins are regaining strength as US President Donald Trump pushes peace talks between Russia and Ukraine. The technical outlook for Bitcoin, Ethereum, and Ripple gradually shifts bullish as selling pressure wanes.
Bitcoin Price Annual Forecast: BTC holds long-term bullish structure heading into 2026
Bitcoin (BTC) is wrapping up 2025 as one of its most eventful years, defined by unprecedented institutional participation, major regulatory developments, and extreme price volatility.
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