Monday, 30 June 2014

Golden Rule


As a range trader, I remember only one Golden Rule:  When prices are going up, identify the range and buy at range lows.  Similarly, when prices are going down, sell at range highs.  When the moves are sideways, do both, i.e. buy at range lows and sell at range highs.


Today's price action is a good example of this rule, buying the range lows when it is going up.  See how,


Here market rallied and then four ranges got formed.  For range A, we did not have a test of the low and we did not get proper entry point.  For range B, we had a TST of range low as an entry pattern.  For range C, we got two BOF opportunities. So in total we had three good trade opportunities to trade with the trend and at the lowest risk.

When we trade the ranges, target is always other range extreme but we can expect more.  Many  a times successful BO happens at other range extreme.  Here price broke out of range C and sustained above it for a while before coming back into the range.

Identify the range and make use of it.

6 comments:

  1. Hi URD
    Nice post mortem
    Very usefull!!

    TBP

    ReplyDelete
  2. URD

    Nice one.Thanks
    But the ranges should be wide enough to initiate trades
    Factors like Space, Risk,Order flow,Critical mass, Trend etc should not be forgotten.

    ST

    ReplyDelete
    Replies
    1. Yes sir. Range should be wide enough and other factors are also important. They are always kept in mind.

      Thanks
      URD

      Delete
  3. urd,
    You are absolutely correct. I am one of the victim today trade against trend ...first 10 mts i didnt understand trend ..when i realized ITH and ITL then within few mts 80 pts went up...so i missed first trading opportunity.....consolidation period i expected mkt will corect..so i gone short when it break 7584..that was the low ( i traded against trend)...so i simply lost 35 pts today !!!!

    Lesson---- No meaning to interpret all market movement
    if you want to make money dont act all buying/selling opportunities.....stick on any one !!!!!! my experience break out is worse one !!!!! 90% situation it will fail...

    ReplyDelete
    Replies
    1. LuckyHaa

      Start to look for ranges and try to trade them only and when they are traded with the trend, they are very much rewarding.

      You are right. BO is the least preferred. In the month of June, I took 6 direct BO trades and only one rewarded me.

      URD

      Delete