Monday, 15 May 2017
Intro to range trading
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In case you haven’t noticed so far, world markets are currently trading flat. Uncertainty surrounding the Trump administration, increasing geopolitical tension in the Korean Peninsula and expectations for further monetary policy accommodation from world regulators later this year has been pressuring investors lately.
For reasons mentioned above and many other factors, equities, commodities and even currencies have been trading in narrow ranges for the past few days. If you are giving your first steps in trading and haven’t yet discovered the vast diversity of market scenarios, you’re probably wonder how to profit when things remain in place for extended periods of time.
That’s exactly why you should get acquainted with range trading, a useful strategy to profit when markets are moving lateral. While this strategy can be applied on a series of different market scenarios, it’s generally associated with times of data shortage and lack of direction.
Buy support, sell resistance
The idea behind range trading is not hard to understand. A range is limited by two bands, an upper band (resistance) and a lower band (support). Those levels are determined by technical indicators. In order to make a profit, you have to buy low, sell high or viceversa.
Once prices enter in a range, they may dance between these two levels for long time, allowing traders to open and close many positions until the channel is broken.
To improve visualization of resistance and support levels, we suggest drawing horizontal lines in your trading charts. By doing so, you’d know exactly where the price is standing inside the range.
Turn up the heat
When things go south or north, making an entry is a bit simpler. But if you see no direction on your chart, then uncertainty is likely to eat your brain. To avoid that, keep an eye on the most popular technical indicators (Stochastics and RSI) to find the right moment for entering a position. Momentum indicators will tell you when market is oversold or overbought, making it easier for you to buy or sell at the right time.
Stay away from risk
No need to tell that markets fluctuate at the speed of sound when unexpected events hit them. While some resistances seem unbreakable and some supports could be very hard to cross, the reality can change within minutes, leaving you exposed to big losses. Always set stop loss positions to prevent heart attacks.
The idea behind range trading is not hard to understand. A range is limited by two bands, an upper band (resistance) and a lower band (support). Those levels are determined by technical indicators. In order to make a profit, you have to buy low, sell high or viceversa.
Once prices enter in a range, they may dance between these two levels for long time, allowing traders to open and close many positions until the channel is broken.
To improve visualization of resistance and support levels, we suggest drawing horizontal lines in your trading charts. By doing so, you’d know exactly where the price is standing inside the range.
Turn up the heat
When things go south or north, making an entry is a bit simpler. But if you see no direction on your chart, then uncertainty is likely to eat your brain. To avoid that, keep an eye on the most popular technical indicators (Stochastics and RSI) to find the right moment for entering a position. Momentum indicators will tell you when market is oversold or overbought, making it easier for you to buy or sell at the right time.
Stay away from risk
No need to tell that markets fluctuate at the speed of sound when unexpected events hit them. While some resistances seem unbreakable and some supports could be very hard to cross, the reality can change within minutes, leaving you exposed to big losses. Always set stop loss positions to prevent heart attacks.
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I am glad to find this intro. I will tell my friends about your website now.
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