Trading Range-Bound Markets

[SlowlyButSurely]

Hi,

I was wondering if anyone has had much success with trading sideways moving markets?

Over the last few weeks I have been working on a strategy that takes advantage of range bound markets. I usually look to scalp around 10-30 pips, entering counter-trend as price approaches a previous intra-day level of resistance.

So far the strategy is working well. I have had both winners and losers but with some good R:R ratios I am net profitable. This said, I will need at least another 2 months of live data before I can be certain it works and has an efficient 'edge'.

So, does anyone else trade in this way? Do you prefer trade solely range-bound markets or do you have a similar/different approach when trading trending markets?

Cheers,

SBS

 

[wackypete2]

What time frame are you looking at? I hate trying to trade ranges on short time frames. But looking at a 4h or daily time frame you should be able to make some profits. Ranging markets can go on for a long time. Generally speaking you have to use different methods to succeed in both type of markets.

Peter

 

[SlowlyButSurely]

What time frame are you looking at? I hate trying to trade ranges on short time frames. But looking at a 4h or daily time frame you should be able to make some profits. Ranging markets can go on for a long time. Generally speaking you have to use different methods to succeed in both type of markets.

Peter

Hi Pete,

I tend to look at a variety of time frames in order to establish a few different things. I tend to look at the 30M - 1H charts to find intra-day ranges. I will then look at the 4H-1D charts to look for any larger levels and signs of correlation. When timing my entry I look at the 1M and 5M charts. I like to see how price reacts at certain levels before entering.

 

[wackypete2]

For me the problem I have with intraday ranges is I usually can't justify a small enough stop loss compared to the target profit. When range trading you really can't let your profits run. A nice smooth trend line or s/r line on a 4h chart usually works nice though. There's plenty of potential profit and the stop doesn't have be to much above or below the line. My favorite set up is when the range is broken and then 1 or 2 candles later closes back inside the range. That signals a false break and good to enter trading the range! It also gives an exact stop level.

I'm not much of a range trader anyway. Since I trade currencies I most often shy away from the ranging pairs unless I find something that looks too good to pass up like the set up I just mentioned.

Peter

 

[SlowlyButSurely]

My favorite set up is when the range is broken and then 1 or 2 candles later closes back inside the range. That signals a false break and good to enter trading the range! It also gives an exact stop level.

Interesting, I will keep an eye out for this next time the markets are close to a big level.

Yes it is certainly true that the move is usually not that big, but I find that by being patient I can place a stop around 5-7 pips away whilst looking to get at least 10 on the reward side before there is likely to be too much resistance. The fact that my stop is above previously tested levels I 'presume' gives me slightly better odds too. I say 'presume' as like I said it will need a lot more testing but I will look into false breaks as that could also increase my odds.

I'm not much of a range trader anyway

I should also mention that my usual trading strategy is quite different from this one, but I thought it could be good to experiment with something new for when the markets are indecisive.