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Indicator: BRAR indicator with Forumla, Strategy, Advantages and Limitations - Trading Worker
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BRAR (Buying and Selling Ratio)

The BRAR (Buying and Selling Ratio) indicator is a technical analysis tool that measures the relative strength between buyers and sellers in the market. It consists of two components - BR (Buying Ratio) and AR (Activity Ratio) - that help traders identify potential market reversals and trend strength by analyzing price movements relative to previous closing and opening prices.

Formula

BR = (High - Prev Close).Sum(n) / (Prev Close - Low).Sum(n) × 100
AR = (High - Open).Sum(n) / (Open - Low).Sum(n) × 100
Where n is typically 26 periods

How BRAR (Buying/Selling Ratio) Works

The BRAR indicator consists of two components - BR (Buying Ratio) and AR (Activity Ratio). It measures the strength of buying and selling pressure in the market by comparing price movements above and below reference points. BR compares the distance between high prices and previous closing prices to the distance between previous closing prices and low prices. AR compares the distance between high and opening prices to the distance between opening and low prices. Higher values indicate stronger buying pressure while lower values suggest stronger selling pressure.

Trading Strategies Using BRAR

Strategy Examples

  • Enter long positions when BR and AR cross above 100
  • Enter short positions when BR and AR cross below 100
  • Look for divergence between BR/AR and price for reversal signals
  • Use extreme readings (above 300 or below 50) to identify overbought/oversold conditions
  • Combine with trend indicators for confirmation of momentum

Support and Resistance Strategy

  • Use BR/AR levels as dynamic support and resistance zones
  • Look for price reactions when BR/AR reach extreme levels
  • Monitor BR/AR convergence at major support/resistance areas
  • Use BR/AR crossovers near key levels for entry signals
  • Combine with traditional support/resistance for confirmation

Trend Identification

  • Strong uptrend when both BR and AR remain above 100
  • Strong downtrend when both BR and AR stay below 100
  • Trend reversal potential when BR/AR cross 100 level
  • Higher BR/AR peaks indicate strengthening uptrends
  • Lower BR/AR troughs suggest strengthening downtrends

Advantages and Limitations

Advantages

  • Effectively measures buying and selling pressure
  • Provides clear overbought and oversold signals
  • Helps identify potential trend reversals
  • Can be used across different timeframes
  • Combines multiple price points for comprehensive analysis

Limitations

  • May generate false signals in choppy markets
  • Lag due to period calculations
  • Requires confirmation from other indicators
  • Less effective in low volatility conditions
  • Can be sensitive to sudden price gaps

Best Practices When Using BR/AR

  • Combine BR/AR signals with other technical indicators for confirmation
  • Use multiple timeframes to validate trend direction and strength
  • Wait for clear crossovers of the 100 level rather than minor fluctuations
  • Consider overall market context when interpreting BR/AR signals
  • Monitor volume alongside BR/AR for stronger confirmation
  • Look for divergences between price and BR/AR for potential reversals
  • Be cautious of false signals during ranging or choppy markets
  • Set appropriate stop-loss levels based on recent price action
  • Pay attention to extreme BR/AR readings for potential reversal points
  • Use BR/AR as part of a complete trading strategy, not in isolation