ORDERCandle Range Theory (CRT): The Three-Candle Setup
Candle Range Theory looks at a single higher-timeframe candle as a range, and asks what happens when the next candle reaches outside it and fails.
The idea in three candles
- The range candle. Its high and low define a range. Many traders resting orders just beyond those extremes — stops and breakout entries — create liquidity there.
- The sweep. The next candle trades beyond one side of the range, triggering that liquidity, but closes back inside the range. The break did not hold.
- The delivery. Price then often travels back through the range: first toward its middle, then possibly to the opposite extreme.
A sweep of the low followed by a close back inside is a bullish setup; a sweep of the high is bearish.
Choosing the timeframe
CRT is usually applied to higher timeframes — the 4-hour and daily candles are popular — and then traded on a lower timeframe for precise entries. In OrderView the CRT indicator lets you choose the range timeframe (the chart's own, 1H, 4H, daily or weekly) independently of the chart you are looking at.
Filtering for quality
Small candles produce many weak setups. OrderView's default "significant ranges only" filter keeps a setup only when the range candle is at least as wide as the average of the last 20 candles, and the sweep goes beyond the range by at least 10% of its size. The middle of the range is drawn as a first target, and finished setups can be kept on the chart, faded, so you can study how past ones played out.
When a setup fails
If a later candle closes beyond the swept extreme, the idea is invalid: the break turned out to be real. That close is a natural place for a stop.
Common mistakes
- Acting before the sweep candle has closed. A wick beyond the range is not enough until the candle closes back inside.
- Ignoring the bigger picture. A bullish CRT inside a strong daily downtrend is a counter-trend trade.
- Expecting the opposite extreme every time. The middle of the range is often the realistic target.
Educational information only, not investment advice. CRT is available as an indicator and as alerts in the OrderView Android app.