Quick moves up and down. Confusion. Which way is the market going? This helps identify range behavior. Race to bottom. Race to the top. Looks like it is gonna break out the reverses right back into the range. This post and my previous posts help Identify range behavior.
I suppose that depends on the trader and his/her personality but much more $$$ can be made trading short-term than long term. Just look how many scalps are on this chart. Add trading SIZE TO IT and a lot of $$ can be made when market is basically going nowhere. In what many call “noise” or chop. But in reality there is no such thing as noise in the markets. Markets move because of pressures and probing by both bears and bulls.
Here is another tactic for range trading. First I identify it as a range by the criteria mentioned in my posts above. This tactic can work on ANY TF range. I short in the top third of the range with limit orders and add to the position if the price move against me. That is, I average down short on adverse movement in the top third of the range. I do so with limit orders. Then I exit on any movement back to the center 1/3 of the zone. I go long in the bottom 1/3 of the range and add on (average down) on adverse movement. Then I exit on movement back towards the center 1/3 of the range. Ido this with limit orders.
Here are 5 trades to take based upon the principles expounded on above. You might want to study the concepts and try it out on a Sim. I identified the range in 10 bars then started trading in this example. However, until one develops the identification skill it may be better to wait until there are 20 bars in the range. Less trades but the identification of the market phase and cycle is clearer. I can trade size on this and make some decent money. I did the example starting with 1 contract and adding 1 contract at a time. Of course, a trader can trade any size they want. S-1 means sell 1 contract...S-2...S-3 ..etc. L1...L2...L3 means LONG.
Thanks for posting the chart Trader1974. It was a good chart to use for expounding upon the concepts. I hope you and others find it useful.
Here is your previous 1 hour chart that just kept going up. The one you lost what you had made during the week. This chart you posted had more info than your first 1 hour of the same price action. It started with a range at the bottom. So, I will show how I would trade this range using the principles explained in the posts above and already exampled out by your other lateral 1 hour chart. But just as a second example here it is. I will post this chart again and show the market cycle too.
Ok here is the same chart but showing the phases of the market cycle. Each phase has it’s own tactics to use to trade it. It is of great importance to develop the skills to identifying the market phases within the market cycle. The reason being trading tactics change when the phases change. 1) In general the market cycle goes from a sideways range (with it’s particular PA characteristics ) to a BO. 2) The BO can be in different forms. It can be a 1 bar spike or a multiple bar spike. Understand that a multiple bar spike on a 5 minute chart is probably just a 1 or 2 bar spike on a 15 min time frame. And on a 30 min probably just a one bar spike. Or the BO can just be small bars one after the other with little or no PB’s. The magenta color square on the chart is the BO phase of the cycle. 3) Once the first PB occurs AFTER THE SPIKE (remember a PB is a bar than goes below the previous bar) THEN the channel phase starts. In this case it was a bull channel. Now, understand that a channel is really just a tilted range. So....some of the principles of range trading explained so clearly above (I hope) apply to channel trading but with a few different twists about them. I am tired so I won’t get into those twists tonight but will on another occasion explain channel trading. Also, I will deal with the concept of implied PB’s (as seen on the chart) later. If I forget, remind me to touch upon the concept. So...identify when a channel starts. When does it start? The answer is annotated on the chart. Why is it important to identify the channel phase? Because trading tactics will change. If I want to have a high win rate i.e. is. If I don’t THEN I suppose it doesn’t matter just trade any ole way. But, I can’t for the life of me understand why anyone would prefer a low win rate over a high win rate. More guruitis I suppose..LOL. Sounds like arthritis..ROFLMAO. I think deep inside we know why traders argue for a low win rate but to just kinda nip it in the bud, without going out on a rabbit trail, suffice it to say that the concept is stupid. IMHO. In summary, and said in a little different way: The market goes from sideways Price Action to Trends and then back to sideways then to trends over and over again and again. It has done so since the 1930’s, and even before then, and it does so today even with computer trading hogging up the execution of trades. It will continue to do the same, at least in our lifetime. It is the nature of the markets. It comes from human behavior (it’s foundation is rooted in our behavior as humans) and I don’t see that changing very much any time soon..LOL..So, if we as traders, CAN LEARN to read price action within the market cycle and it’s phases really ...really ...well, then develop tactics that are viable for each phase, followed by executing trades based upon those premises, AND WE can get our psychological defects, or whatever, corrected THEN we will be set for life to trade. Am I afraid that by spilling the beans here I will lose my edge? Not in the least tiny bit. Actually, it is exactly the opposite. The more, that more traders, learn and use the concepts the more accurate it becomes..ROFLMAO. I have nothing to sell. I hope the explanations are helpful to traders. Understand the trend phase of the cycle is made up of two components. A BO and a channel. Both together form the trend phase. Both are traded differently. As are ranges. I won’t have time to trade the first part of this trading week coming up as I am busy doing other things but this will give you guys something to think about. Maybe in the latter part of the week I can trade a little. I suppose traders are looking at this stuff and thinking about it and maybe practicing the concepts on a SIM. It takes alot of time to explain it and annotate the charts.
Very true. Excellent posts Volpri. I am certain your examples of Range etc will improve my own attempts at trading via price action