It is essential to identify as soon as possible what kind of market I am trading. Of course, this is can change in a single price bar but I need to what the market is doing now and trade on the assumption that these conditions are continuing until a predefined event happens (e.g. a TL or KL break). If that happens, I need to switch strategies to fit the new conditions.

How do we spot a ranging market?

A ranging market is one that goes nowhere in the end but sees a lot of up and down action in between. The market is looking for orders and so will seem to be magnetically attracted to KLs and TLs. A ranging market will become a trending market once an imbalance between buyers and sellers develops.

This is an example of a ranging market:

  1. The 169 goes straight through the middle of the PA.
  2. Every break of the Bolli Bands reverses – new highs are sold and new lows are bought.
  3. The market respects levels with a pull back (PB) of at least 10pts.

Tip: Shade the no-man’s land on my charts so that I know what’s what on shorter time frames.

Strategies that work

The 3Min Bolli trade comes into its own here while TL breaks are a disaster. See a description of this trade here: 3Min Bolli

In a ranging market, you can wait for the best entry. There is no need to hurry into a trade, and you can wait for exact levels – the market is looking for them too so you are in good company.

However, a ranging market has to break out at some point and that means you need to know where the levels and TLs are that are containing the range and be ready to trade them. False breakouts are inevitable so you must weigh up the costs of missing the break versus the cost of losing trades that result from false breaks..

One Response to “How to identify a ranging market and how to trade it”

  1. Slager hengelo

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