Online Forex Blog

Meet the High Velocity Market Master and get your FREE COPIES of the Ultimate Day Trading System and the Universal Risk & Money Management Tool FREE just now. This Day Trading System can trade forex, stocks and futures on any timeframe and is a gift from Mark Soberman, the President of Netpicks Trading. Downlaod it FREE and watch the videos that show how to use it. Download your Forex Scalping Cheatsheets plus the Forex Swing Trading Powerful FOREX-4 PACK End of Day Trading Training Kit FREE! Finding a security in a trading range is a much difficult job as compared to finding a trending security. Technical indicators can be used in identifying when a security is in a trading range and when to enter and exit the range. Now, if you want to trade ranges, then you need to use one or two oscillator also known as non trending indicators.

So if you want to swing trade ranges, you can use the ADX (Average Directional Index) oscillator. If its value is less than 20, it means that the security is ranging. An ADX value of more than 20 means that the security is not ranging and is perhaps trending! A value of more than 30 is a sure indication that the security is trending.

Now before range trading make sure that the range is wide enough for you to make meaningful profits. Suppose the stock price is oscillating between the price of $55 and $60. This range of just $5 is not wide enough for you to cover your trading costs in the shape of broker commissions. However, if the range is between $5 and $10, it is wide enough for you to cover your trading cost as well as make profit.

Now before range trading you need to determine the strength of the range. The strength of the range depends on time. The longer the trading range has been in force, the more chances are that it will continue. The more the security price touches the support or resistance, the higher chances are that these support and resistance will continue.

The support and resistance levels in the range should form a horizontal line. The more flat these two levels are, chances of a profitable range trading will be higher. Sometimes, either one or both the support and resistance are slanting. This is not a range. Flatter the support and resistance, stronger will be your conviction that the range is genuine.

How to enter a range? Use the stochastic. When the stochastic crosses the moving average from an oversold level, it is a buy signal. Place the stop loss slightly below the support or the price at which you entered the trade. Your take profit is almost the same as the range. In the above example, we had used $5 as the range. This should be your take profit. So when range trading, you buy at the support and sell at the resistance. This way, you can make nice profit!