How to Trade a Range: Trade the Most Interesting Market in the World

by Heikin Ashi Trader, Dao Press (Editor)

How to Trade a Range Trade the Most Interesting Market in the World Financial markets are predominantly trading in trendless zones, which traders call trading ranges or sideways markets. It then appears that they earn money when a market is in a trend and they should avoid trendless markets, because here there is nothing to write home about. Despite this apparent finding, most short-term trading strategies rely on the trend-following model, although it is demonstrably difficult to implement. Most traders are more or less looking for a bigger move. The experience shows, however, that trading "moves" or "trends" is not that easy. Either the trader recognizes the trend too late, or the movement offers hardly any opportunities to enter. There is, however, a specialized group of traders who do not care about trends. They do exactly the opposite. They trade when the market is in a range. This book describes the methods and tactics of these traders. It is not about how to identify a range and then to trade the outbreak from it, but how to trade the range itself. Table of Contents 1. Introduction to Range Trading 2. What Is a Range Market? 3. Look to the Left! 4. How Do I Draw Proper Support and Resistance Lines? 5. In Which Markets Can You Operate Range Trading? 6. How to Trade a Range in Practice? 7. Where Should I Place the Stop? 8. Questions of Trade Management A. Should You Close the Trade Before the Weekend? B. Should You Use Trailing Stops in Range Trading? C. What Should You Do if the Trade Goes “Nowhere”? D. Should I Push the Stop Closer to the Market? 9. Examples of Range Markets A. Trading Ranges in the Foreign Exchange Market B. Deeper Examination of a Sideways Period in the E-Mini C. Deeper Examination of a Sideways Period in the FDAX 10. Advanced Strategies A. Opportunistic Limits B. Fakeouts 11. Trend Channels (Channel Trading) 12. What Is Really Important 13. Range Trading for Day Traders and Scalpers Glossary

105 pages, Kindle Edition

Published October 23, 2017

Reviews

[Lawrence Hung · Rating 5 out of 5]

People like to trade a trending market. But the author tells us that the rule is that "financial markets are predominantly trading in trendless zones", i.e. sideways market or a trading range. Trends are the exception, while sideways markets are the rule and account for 70% of the market time. This is the second book by Heikin Ashi Trader that I read. This message is simple, but powerful.

The author suggests that it is quite difficult to break out of a range unless there is economic catalyst (money or news). To form a trading range, points of support and resistance are lined up respectively in a rectangular formation. Prices bounce back and forth inside this rectangle like a ping pong ball. The basic idea of range trading (vs. trend trading), therefore, is to buy at the support area and sell at the resistance area, and vice versa if you are a short seller.

But the point is, it is difficult to define a range either, or identify it for that matter. Like other trading strategy, it is no crystal ball where the direction of the price is taking. Just as you thought there was a support area, the price broke it down with a breakout. On the other hand, the price might just turn its direction before reaching the target exit on the other end, the resistance level as defined by the traders. How to draw a "correct" line of support or resistance is therefore the key question. As author says, "it depends ultimately on the trader's skills or experience whether he actually recognizes a range as such or not and no one will ever be able to say with certainty what is going on in the market."

Because of the overnight "gaps", stocks are generally less suitable to trade with the range than other more liquid assets like futures and currencies. As to the timeframe, it is suggested to use daily, 4H or 30m to identify the ranging signal while using the next lower timeframe for trade entry. There are other useful advices and examples in the book but I better let readers discover them by themselves. Otherwise, there would be no fun during the reading.

Overall, I recommend the book to any novice traders. This is one of the entry level book for the trading community, and a good one.