Trading the Ranges
- Thread starter veluri1967
- Start date
- Status
Let us not complicate our study of candlesticks.
Covered Trending Bars with or without wicks.
And now,
THE DOJI.
If you were to learn only one candle by name, this would have to be the one. A "common" doji is shaped like a cross. A doji has no real body. What it says is that there is a stalemate between supply and demand. It is a time when the optimist and pessimist, amateur and professional are all in agreement. This market equilibrium argues against a strong uptrend or downtrend continuing, so a doji often marks a reversal day.
A doji in an overbought or oversold market is therefore often very significant. The opening of the next day should be watched carefully to see if the market carries through on the reversal. Note, a candle with a very small real body often can be interpreted as a doji.
GRAVESTONE DOJI.
The gravestone doji occurs far less frequently than the common one, but gives even a clearer signal. At the top of an extended move, it says the bulls tried to move the market higher and couldnt do it. The stock, or in this case the index, can not sustain the probe to new high ground. It opens and
closes at the exact same level creating the appearance of a tombstone.
Covered Trending Bars with or without wicks.
And now,
THE DOJI.
If you were to learn only one candle by name, this would have to be the one. A "common" doji is shaped like a cross. A doji has no real body. What it says is that there is a stalemate between supply and demand. It is a time when the optimist and pessimist, amateur and professional are all in agreement. This market equilibrium argues against a strong uptrend or downtrend continuing, so a doji often marks a reversal day.
A doji in an overbought or oversold market is therefore often very significant. The opening of the next day should be watched carefully to see if the market carries through on the reversal. Note, a candle with a very small real body often can be interpreted as a doji.
GRAVESTONE DOJI.
The gravestone doji occurs far less frequently than the common one, but gives even a clearer signal. At the top of an extended move, it says the bulls tried to move the market higher and couldnt do it. The stock, or in this case the index, can not sustain the probe to new high ground. It opens and
closes at the exact same level creating the appearance of a tombstone.
Last edited:
Ya...columbus,
You are on right time to be here.
How can I trade Ranges without your Bollinger Bands.
Let me take this previlege to touch upon a bar named "Gimmy Bar"
GIMMY BAR IS NOTHING MORE THAN REVERSAL BAR THAT TAKE PLACE
ONCE PRICES HAVE REACHED THE UPPER OR LOWER BOLLINGER BANDS IN A SIDEWAYS MOVING MARKET.(TRADING RANGE)
Once prices touch the upper band, the bar touching the upper band or the very next bar may become designated as the Gimmee bar. All
that is required is the occurrence of a price bar which closes lower than it opens.
Should such a price bar occur, a sell short order is to be executed one tick below the low of the Gimmee bar.
(Reverse is true for longs)
We would refrain from entering a trade if the extreme of the Gimmy bar has touched or is very close (a matter of judgment) to the moving average (the middle line between the two bands). Quite often prices stall out or experience minor congestions when they reach the level of the moving average.
We would refrain from entering a trade if the Gimmy bar is excessively long in length relative to the size of the preceding price bars. Often, when there has been a very large size bar, the next few bars will display a reaction to the move made by the large size bar.
We would refrain from entering a trade if the opening of the bar following the Gimmy bar is a gap open beyond the price range of the Gimmy bar. Gap openings outside the price range of one bar will often see prices move back toward the previous bar's close.
For further guidance on Gimmy Bars, please refer the following link of Mr.Rajendrani.
http://www.traderji.com/technical-analysis/30843-trading-setups-technical-trading.html#post336827
You are on right time to be here.
How can I trade Ranges without your Bollinger Bands.
Let me take this previlege to touch upon a bar named "Gimmy Bar"
GIMMY BAR IS NOTHING MORE THAN REVERSAL BAR THAT TAKE PLACE
ONCE PRICES HAVE REACHED THE UPPER OR LOWER BOLLINGER BANDS IN A SIDEWAYS MOVING MARKET.(TRADING RANGE)
Once prices touch the upper band, the bar touching the upper band or the very next bar may become designated as the Gimmee bar. All
that is required is the occurrence of a price bar which closes lower than it opens.
Should such a price bar occur, a sell short order is to be executed one tick below the low of the Gimmee bar.
(Reverse is true for longs)
We would refrain from entering a trade if the extreme of the Gimmy bar has touched or is very close (a matter of judgment) to the moving average (the middle line between the two bands). Quite often prices stall out or experience minor congestions when they reach the level of the moving average.
We would refrain from entering a trade if the Gimmy bar is excessively long in length relative to the size of the preceding price bars. Often, when there has been a very large size bar, the next few bars will display a reaction to the move made by the large size bar.
We would refrain from entering a trade if the opening of the bar following the Gimmy bar is a gap open beyond the price range of the Gimmy bar. Gap openings outside the price range of one bar will often see prices move back toward the previous bar's close.
For further guidance on Gimmy Bars, please refer the following link of Mr.Rajendrani.
http://www.traderji.com/technical-analysis/30843-trading-setups-technical-trading.html#post336827
Last edited:
BREAKOUT TRADES
A breakkout is simply a move beyond some prior point of significance such as a trendline or a prior high or low, including the high or low of the previous bar.
To a trader, it implies strength and a possible new trend. For example, if a bull breakout bar has a strong close and the next several bars also have strong closes and trending highs and lows (no bar pullbacks), then the market will likely be higher than it is at the current moment at some point before the market reverses back beyond the start of the breakout move.
The breakout can be of anything, such as a trendline, a trading range, or the high or low of the day or yesterday. It does not matter because they are all traded the same. Fade it if it fails, as most breakouts do, and re-enter
in the direction of the breakout if the failed breakout fails and therefore becomes a Breakout Pullback. Only rarely is it best to enter on the breakout and it is almost always better to wait for a failure or a Breakout Pullback.
On most days, traders look at new swing highs and lows as possible fade setups. On a strong trend day, however, the breakouts are usually on huge volume, and there is very little pullback even on a 1-minute chart. It is clear
that the trend traders are in control.
When a trend is that strong, a price action trader will be entering with Trend on a High/Low I or 2 pullback before
and after the breakout and usually not on the breakout. He is always trying to minimize the risk of the trade.
However, once you recognize that a strong trend is underway, entering with Trend for any reason is a good
trade. In a strong trend, every tick is a with Trend entry, so you can simply enter at the market at any point using your swing size and use a reasonable swing stop.
TERMS USED
Breakout - Already explained in the above paragraphs
Fading - The reversal of breakout i.e. Failed breakout.
Breakout Pullback - The reversal of Failed breakout i.e. Failed Failed breakout
RANGE TRADER'S POINTS
1. Contrary to Momentum Trader, a Range Trader never enters the trade on first breakout. Wait for Fading. Enter the trade at Breakout Pullback.
2. On maximum trading days, a Range Trader should look for a swing high and low as possible fade setups. He should closely watch the unusual high volume figures on breakouts to avoid fade setup failures.
A breakkout is simply a move beyond some prior point of significance such as a trendline or a prior high or low, including the high or low of the previous bar.
To a trader, it implies strength and a possible new trend. For example, if a bull breakout bar has a strong close and the next several bars also have strong closes and trending highs and lows (no bar pullbacks), then the market will likely be higher than it is at the current moment at some point before the market reverses back beyond the start of the breakout move.
The breakout can be of anything, such as a trendline, a trading range, or the high or low of the day or yesterday. It does not matter because they are all traded the same. Fade it if it fails, as most breakouts do, and re-enter
in the direction of the breakout if the failed breakout fails and therefore becomes a Breakout Pullback. Only rarely is it best to enter on the breakout and it is almost always better to wait for a failure or a Breakout Pullback.
On most days, traders look at new swing highs and lows as possible fade setups. On a strong trend day, however, the breakouts are usually on huge volume, and there is very little pullback even on a 1-minute chart. It is clear
that the trend traders are in control.
When a trend is that strong, a price action trader will be entering with Trend on a High/Low I or 2 pullback before
and after the breakout and usually not on the breakout. He is always trying to minimize the risk of the trade.
However, once you recognize that a strong trend is underway, entering with Trend for any reason is a good
trade. In a strong trend, every tick is a with Trend entry, so you can simply enter at the market at any point using your swing size and use a reasonable swing stop.
TERMS USED
Breakout - Already explained in the above paragraphs
Fading - The reversal of breakout i.e. Failed breakout.
Breakout Pullback - The reversal of Failed breakout i.e. Failed Failed breakout
RANGE TRADER'S POINTS
1. Contrary to Momentum Trader, a Range Trader never enters the trade on first breakout. Wait for Fading. Enter the trade at Breakout Pullback.
2. On maximum trading days, a Range Trader should look for a swing high and low as possible fade setups. He should closely watch the unusual high volume figures on breakouts to avoid fade setup failures.
Day trading is a difficult road to take as a means of making profits in stocks and futures.
Most day-trading methods, however, require considerable attention. Although day trading is both time consuming as well as difficult, there are ways in which to harness the profit potential of day trading.
I personally feel that it would be incomplete if I fail to give a setup/strategy based on a breakout.
This method can be very riskybut it can also produce some very large profits. The best time to begin using this method is after it has had 35 losses in a row.
The 30-minute breakout method discussed in this post will help you get the edge on day trading, but it will require the following:
1.Maximum discipline and attention to rules.
2.Persistence.
3.At least Rs.50,000 in starting capital for trading the full-sized Nifty contract
4.The ability to accept at least seven consecutive losing trades.
5.The ability to sit at the computer all day.
6.The discipline to ride profits until the end of the trading day.
7.The eventual ability to trade multiple positions.
THE CONCEPT AND SETUP
The 30-minute breakout method (30MBO) uses the price high and price low of the first 30 minutes of each trading day as the setup.
Finding the setup is very simple. All you have to do is to make note of the high and low price for the first 30 minutes of the trading session; this can only be determined after the first half-hour is over.
A buy trigger occurs when and if any subsequent 30-minute price bar ends above the high of the first 30-minute price bar. A sell trigger occurs when any subsequent 30-minute price bar ends below the low of the first
30-minute price bar.
A trigger can only occur at the end of a bar, not during a bar.
A trigger can occur at the end of any 30-minute bar up to the last hour of trading.
MANAGEMENT OF TRADES
Follow-through for this method is very simple, but you must be consistent and highly disciplined in order to employ the follow-through method profitably.
Here are the rules:
1.As soon as a trade has triggered, your stop-loss becomes the opposite side of the trade. In other words, if a buy is triggered first, then the stop is a 30-minute ending price below the low of the first 30-minute ending bar and vice versa for a short.
2.When a trade is triggered, the first profit target is the range (highlow) of the first 30-minute bar.
3.If you have multiple contracts, then take profit on part of your position at the first profit target and place a stop at breakeven.
4.If and when the trade achieves twice the range of the first 30 minutes place a stop at the first profit target. If you have multiple positions, take profit on another portion of your position and place a stop at the first
profit target.
5.Exit MOC (market on close) on all positions not stopped out.
6.If you get a buy first and are stopped out, then reverse to a sell and vice versa.
7.Only take one reverse trade per day. In other words, if the second trade loses money then there are no additional trades for the day.
8.Always exit at the end of the day.
The rules are clear and concise. Practice and the ability to ride large swings both in your favor and against you are of paramount importance if you want to be successful with this method.
Paper trade initially for a week or so on your favourite stocks/futures. Adjust the profit targets as per the volatility of stock/futures.
Happy Trading
Most day-trading methods, however, require considerable attention. Although day trading is both time consuming as well as difficult, there are ways in which to harness the profit potential of day trading.
I personally feel that it would be incomplete if I fail to give a setup/strategy based on a breakout.
This method can be very riskybut it can also produce some very large profits. The best time to begin using this method is after it has had 35 losses in a row.
The 30-minute breakout method discussed in this post will help you get the edge on day trading, but it will require the following:
1.Maximum discipline and attention to rules.
2.Persistence.
3.At least Rs.50,000 in starting capital for trading the full-sized Nifty contract
4.The ability to accept at least seven consecutive losing trades.
5.The ability to sit at the computer all day.
6.The discipline to ride profits until the end of the trading day.
7.The eventual ability to trade multiple positions.
THE CONCEPT AND SETUP
The 30-minute breakout method (30MBO) uses the price high and price low of the first 30 minutes of each trading day as the setup.
Finding the setup is very simple. All you have to do is to make note of the high and low price for the first 30 minutes of the trading session; this can only be determined after the first half-hour is over.
A buy trigger occurs when and if any subsequent 30-minute price bar ends above the high of the first 30-minute price bar. A sell trigger occurs when any subsequent 30-minute price bar ends below the low of the first
30-minute price bar.
A trigger can only occur at the end of a bar, not during a bar.
A trigger can occur at the end of any 30-minute bar up to the last hour of trading.
MANAGEMENT OF TRADES
Follow-through for this method is very simple, but you must be consistent and highly disciplined in order to employ the follow-through method profitably.
Here are the rules:
1.As soon as a trade has triggered, your stop-loss becomes the opposite side of the trade. In other words, if a buy is triggered first, then the stop is a 30-minute ending price below the low of the first 30-minute ending bar and vice versa for a short.
2.When a trade is triggered, the first profit target is the range (highlow) of the first 30-minute bar.
3.If you have multiple contracts, then take profit on part of your position at the first profit target and place a stop at breakeven.
4.If and when the trade achieves twice the range of the first 30 minutes place a stop at the first profit target. If you have multiple positions, take profit on another portion of your position and place a stop at the first
profit target.
5.Exit MOC (market on close) on all positions not stopped out.
6.If you get a buy first and are stopped out, then reverse to a sell and vice versa.
7.Only take one reverse trade per day. In other words, if the second trade loses money then there are no additional trades for the day.
8.Always exit at the end of the day.
The rules are clear and concise. Practice and the ability to ride large swings both in your favor and against you are of paramount importance if you want to be successful with this method.
Paper trade initially for a week or so on your favourite stocks/futures. Adjust the profit targets as per the volatility of stock/futures.
Happy Trading
Wanting Certainty in Uncertain markets
It is only human nature to want certainty. Yet this desire often puts us at a disadvantage in the market. By seeking a sure-thing, we typically are late in getting in the market, and late in taking profits when getting out. Is there a better time to enter or exit the market. And .if so, how do we know for certain that we are right.
You've just witnessed the most amazing confirmation of your trading methodology. The market just completed a four-day winning streak of your buy and sell signals, but you were only trading on paper. Tomorrow you want to back up your opinion with real money. Should you?
No matter how brilliant your trading strategies, winning streaks like
losing streaks-tend to repeat in cycles. Assuming your trading methodology wins profits over time, you are better off waiting until you sustain several days of losses than jumping in at the top of the equity curve. Even the best systems have periods of losses. To expect a winning cycle to occur unabated is a big mistake. Chances favor a winning trade coming off a series of losing days if you have a winning strategy.
It is only human nature to want certainty. Yet this desire often puts us at a disadvantage in the market. By seeking a sure-thing, we typically are late in getting in the market, and late in taking profits when getting out. Is there a better time to enter or exit the market. And .if so, how do we know for certain that we are right.
You've just witnessed the most amazing confirmation of your trading methodology. The market just completed a four-day winning streak of your buy and sell signals, but you were only trading on paper. Tomorrow you want to back up your opinion with real money. Should you?
No matter how brilliant your trading strategies, winning streaks like
losing streaks-tend to repeat in cycles. Assuming your trading methodology wins profits over time, you are better off waiting until you sustain several days of losses than jumping in at the top of the equity curve. Even the best systems have periods of losses. To expect a winning cycle to occur unabated is a big mistake. Chances favor a winning trade coming off a series of losing days if you have a winning strategy.
Let us get on to the point of our main theme "Trading the Ranges"
I am giving below a simple formula to calculate Range Top and Bottom which serve us two purposes. One is that it helps us to trade range bound market ie sell at top and buy at bottom. Also it helps us to trade a trend if any of these Range support or resistance is broken by reversing our positions. Isnot it a two edged weapon?
The formula is as follows:
(High + Low + Close)/3 = X
NUM1=2X - High
NUM2 =2X - Low
Let us consider the values of Nifty Spot for example.
High - 5333.90
Low - 5298.90
close - 5309.40
X = (5333.90 + 5298.90 + 5309.40)/3 = 5314.06
NUM1 = 2 x 5314.06 - 5333.90 = 5294.22
NUM2 = 2 x 5314.06 - 5298.90 = 5329.22
Here NUM2 is highest and it becomes resistance. NUM1 is lowest and it becomes support.
Next day, the market opened at 5252.25 and has a high of 5276.95 and a low of 5198. That is Nifty has opened with a huge gap down ie below support about 41 points and tried to reach support and eventually lost ground and touched a low of 5198. Since the price out of range of above pivots, its in a trend zone and should look for a shorting opportunity below support as long as it is below support. If the price successfully breaks support and enters in the Range, we should look for buying with a target of resistance. Hope the method is clear.
How to trade these Pivots on Range days.
Sell at resistance and buy at support.
We have already learned two important candlesticks in above posts to assess the price movement at resistance and support.
Further, look out for failed breakout candlesticks at these two important levels to trade.
Note :- Successful penetration of these resistance and support points, will throw us an opportunity to enter the trade as trend following.
One important clue for identifying a successful breakout is a definite close beyond these points with higher volumes.
There is every likelihood of Gap openings making calculated resistance and support redundant.
So, let us add a new dimension to them.
Take first half an hour or one hour high/low. Continuing the above example, the high/low of first half an hour are 5269 and 5247.
Now, consider today's anticipated range as per above resistance/support as 5329.22 - 5294.22 = 35
Add 35 to Low of first half an hour ie 5247 + 35 = 5282
Subtract 35 from High of first half an hour ie 5269 - 35 = 5234.
It is likely that the price will hit any of these two numbers ie either 5282 or 5234. Hitting both is very unlikely.
In the example, the price has hit 5234 but failed to hit 5282.
I am giving below a simple formula to calculate Range Top and Bottom which serve us two purposes. One is that it helps us to trade range bound market ie sell at top and buy at bottom. Also it helps us to trade a trend if any of these Range support or resistance is broken by reversing our positions. Isnot it a two edged weapon?
The formula is as follows:
(High + Low + Close)/3 = X
NUM1=2X - High
NUM2 =2X - Low
Let us consider the values of Nifty Spot for example.
High - 5333.90
Low - 5298.90
close - 5309.40
X = (5333.90 + 5298.90 + 5309.40)/3 = 5314.06
NUM1 = 2 x 5314.06 - 5333.90 = 5294.22
NUM2 = 2 x 5314.06 - 5298.90 = 5329.22
Here NUM2 is highest and it becomes resistance. NUM1 is lowest and it becomes support.
Next day, the market opened at 5252.25 and has a high of 5276.95 and a low of 5198. That is Nifty has opened with a huge gap down ie below support about 41 points and tried to reach support and eventually lost ground and touched a low of 5198. Since the price out of range of above pivots, its in a trend zone and should look for a shorting opportunity below support as long as it is below support. If the price successfully breaks support and enters in the Range, we should look for buying with a target of resistance. Hope the method is clear.
How to trade these Pivots on Range days.
Sell at resistance and buy at support.
We have already learned two important candlesticks in above posts to assess the price movement at resistance and support.
Further, look out for failed breakout candlesticks at these two important levels to trade.
Note :- Successful penetration of these resistance and support points, will throw us an opportunity to enter the trade as trend following.
One important clue for identifying a successful breakout is a definite close beyond these points with higher volumes.
There is every likelihood of Gap openings making calculated resistance and support redundant.
So, let us add a new dimension to them.
Take first half an hour or one hour high/low. Continuing the above example, the high/low of first half an hour are 5269 and 5247.
Now, consider today's anticipated range as per above resistance/support as 5329.22 - 5294.22 = 35
Add 35 to Low of first half an hour ie 5247 + 35 = 5282
Subtract 35 from High of first half an hour ie 5269 - 35 = 5234.
It is likely that the price will hit any of these two numbers ie either 5282 or 5234. Hitting both is very unlikely.
In the example, the price has hit 5234 but failed to hit 5282.
Last edited:
- Status
| Thread starter | Similar threads | Forum | Replies | Date |
|---|---|---|---|---|
| O | Should we ignore loss in Forex Trading? | Forex | 2 | |
| O | Fundmentals Of Forex Trading Strategies | Forex | 0 | |
| O | The reality of Forex Trading Business. | Forex | 2 | |
|
I need AFL to find trading ranges | AmiBroker | 0 | |
| B | Intraday trading ranges for a scrip | Technical Analysis | 5 |