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You probably already know this by heart…
Buy at support, sell at resistance.
So you go:
“Hell yeah, range markets are perfect for me to trade.”
But what if I tell you that not all support and resistance are created equal?
You can’t simply just sell at resistance and buy at support even in a range market.
Well, if you want to find out why then tune in to today’s episode.
Hey hey, what’s up my friend!
Welcome back to today’s episode where we’ll be discussing:
How to trade range like a PRO.
So here’s the thing…
For me, I got started with range trading in my early years of trading.
Because it seems to be one of the easiest trading strategies to trade with.
Just buy the lows of the range and sell at the highs of the range.
What could go wrong?
And it’s only till I traded it then I realized:
“Man, it’s not as easy as I thought it would be.”
And you would have probably encountered the same thing when you trade range.
The first question you’ll always ask yourself is:
How do I know if the range is going to hold or not?
Every time you buy the lows of the range, it breaks down.
Every time you short the highs of the range, it breaks out.
So the first thing to know when you’re trading range is this…
1. Don’t short higher lows into resistance
Likewise, you don’t want to be buying when you see lower highs into support.
Let me explain.
When you notice higher lows into resistance, this is a sign of strength.
It tells you that the buyers are willing to buy at these higher prices.
So the price is likely to breakout higher.
And this is where you don’t want to be shorting.
Also, when you are shorting higher lows into resistance – your profit potential is limited.
Because if you were to short at resistance, then at the previous swing low you’ll expect buying pressure to come in.
So there’s not much “meat” left in that move.
So take note:
- Avoid shorting when you notice higher lows into resistance
- Avoid buying when you notice lower highs into support
2. Trade the power move into resistance
Now you might be thinking:
“Okay Rayner, how do I trade the range then?”
Whenever I trade in the range, I like to focus on this one thing…
I want to see a nice power move into support or resistance when I’m buying or selling.
Let’s say I’m looking to short, I want to see a nice power move into resistance
A power move is a strong move, where the market hits resistance very quickly.
You’ll see 2 or 3 big bullish candles hitting resistance very quickly.
This is a very strong momentum.
Whenever you see a strong power move into resistance…
Chances are, the market needs to breathe after moving so fast in a short period of time.
So it might do a pullback or even reverse altogether.
If you’re looking to short the highs of the range, this is where you’ll take advantage of this phenomenon.
Whenever the market makes a power move into resistance, you’ll have greater profit potential.
This is unlike the higher lows into resistance, I’ve mentioned earlier.
Whenever the price makes a power move, the next area where buying pressure would come in is usually at the start of the power move.
It’s the original price level where the big move started.
This is where buying pressure is likely to come in.
After it had moved so fast in a short period of time, the reversal could be equally swift towards the downside.
And the profit potential for that move is larger for you as well when you’re short.
Finally, when you’re trading the range you want to…
3. Pay attention to the big picture
This is otherwise known as the trend.
Let’s say you’re trading range on the 2-hour timeframe.
You’ll want to pay attention to where the daily timeframe is.
Because if you notice that daily timeframe is in an uptrend, then you want to be buying the lows of the range on the lower timeframe.
This increases the probability of your trade working out.
With that said…
I have come towards the end of this episode and I’ll talk to you soon.