On Range Trading by Joe Luisi
Markets move from trading ranges to trends and back into trading ranges. Presented here are methods to identify the trading opportunities based on identifying trading ranges.
Each time you look at a chart, you probably see trading opportunities because the practiced eye easily takes notes of the trading ranges and the trends between them. But it's not always easy to tell when a breakout from a trading range is simply a temporary move or the first step in a trend. Understanding how to examine a market range can help traders better analyze and trade the markets they follow. A market's range can vary from intraday, daily, weekly to monthly, depending on the time frame. A low or narrow range occurs when the market is slow - impending holidays, for example, or when traders are undecided as to the next direction, so little activity takes place. When a market leaves a trading range, however, activity increases as traders move into the market, propelling the market into
A low range can symbolize a market equilibrium. Buyers and sellers are trading in between defined support, the price level that is the current low and resistance that is the recent high. As the range tightens, stops, which are held by floor brokers as resting orders that are activated if trading hits a certain price, accumulate above and below the trading range.