Trading the Ranges

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veluri1967

veluri1967

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#1
#1


Hi to all,

Its often said that the markets trade in ranges for a longer time and as a trader or investor its opt to learn to trade these ranges.

We have MA crossover to be precise to get into trending markets. Also, a visual screening of a chart throws some light to pin point a trend. There are numerous strategies to trade trending markets such as breakouts, NR7 setups, multiple MA crossovers,Turtle Trading, trendlines etc. As already said, these are all helpful when the markets are trending. Trending markets are rare.

When the markets are in range, what are the possible strategies to deploy.
Are there ways to trade with higher probabilities to trade ranges.

A close watch on the chart will enable us to trade ranges. This is the crux of this thread is to discuss various high probability strategies to trade ranges.


If the sideways price action has lasted for about 10 bars, then a trader has to be particularly careful because the bulls and bears are in very tight balance.

Trading breakouts in this situation can be costly since every brief up move is sold aggressively by the bears, and the new bulls are quick to exit. Likewise, every sharp move down is quickly reversed.

There should be ways to trade this type of market profitably.
 
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veluri1967

veluri1967

Well-Known Member
#2
#2
Some terms we need to understand. The list is not exhaustive. The terms will be added to the list in due course.

1. Trend
2. Countertrend
3. Breakout
4. Failed Breakout
5. Breakout Pullback
6. Wedge
7. Flag (Both Bear and Bull)
8. Trendline
9. Break of Trendline
10. Breakout Test or Breakout Test failure
11. Double Top
12. Double Bottom
13. EMA
 
veluri1967

veluri1967

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#3
#3
It is easy to trade trends. Entry anywhere in the middle of a trend can be profitable. But in our topic of range trading, what if the trend is broken?

Is the break of trend valid or not? Or is it a mere pause in price action? How to identify a false break of trend? Or how to identify a false false break of trend ie true break of trend?

Breakout also paves way for profitable trades. Breakout trades can vary according to timeframes. Break of Daily High or Low. Break of weekly high or low. Break of 15 min or hourly high or low. Breakout trades offer a good profitable booty. But often, we encounter falst breakouts. The price reverts back to trading range thus causing losses to our trades which are activated on breakout strategy. A quick reversal of price into trading range is again throws up a setup for trading.

Thatz not the end of story. False breakouts again fail ie breakouts will be tested again pulling us into trades. There are ways to identify a true breakout, pullback breakout, breakout test and breakout test failure.
 
veluri1967

veluri1967

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#5
#5
Hi Alok,

Its not going to be a single simple strategy. Its going to cover a vast syllabus ie candlestick patterns, MA crossovers, Bar by Bar studies, etc etc.

Keep with the thread and it should help to improve your trading journey.

Cheers.
 
veluri1967

veluri1967

Well-Known Member
#6
#6
Watch the following chart. Timeframe 15 min. Guess who might have made money and who has not.



Traders who traded this chart by following breakout strategy would have been the worst hit. Price tried to break the low of first 15 min low three times and pulled back into the range.

It is a kind of Range.

There are a total of 27 bars (Each of 15 min) in the chart.

Watch Bar No.11, 14 and 23. Are they giving some hint at what could be the next move?
 
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veluri1967

veluri1967

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#7
#7
Al Brooks in his famous book says "For a trader, it is most useful to think of all bars as being either trend bars or nontrend (trading range) bars."

So, let us try to define Trend bars as those which

a) have open at one end and close at other end. or
b) have a long body with little wicks or no wicks or
c) have a body atleast of 75% of high-low.

Exception is that some of the bars can have large wicks.

Non-trend bars can be those which are not categorised as trend bars.
 
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