Raghee Horner of IBFX explores range trading…
We all know that in forex, the market is either ranging or trending. The problem is that when it’s ranging on one timeframe, it can be trending on another, and of course vice versa. In fact, the market is ranging more than it’s trending, so clearly, the trend is not always your friend. Well, it is until is bends.
Most traders are trend traders, that is, they’re comfortable entering the market when there is a clear direction. The stronger the trend, the happier they are. Of course, trend trading is popular because everyone knows how dangerous it is to start picking tops and bottoms. Been there, done that, and unless you can really really master Support and Resistance, don’t even think about trying to pick tops and bottoms. But once you master it, trust me, it’s not as hard as you might think.
Raghee has her own style, ever trader does, and she explains, “Trading within a range, I feel, is an aggressive set up style that uses the support of a floor and resistance of a ceiling to trigger trades inside what could be called a Rectangle or Sideways Narrow Channel. But not just any sideways congestion can be set up for what I call an “Exhaustion Fade”. The entry name quite literally explains what I am looking for: As prices approach an established ceiling or floor I am watching for a loss of momentum and a reversal”.
Of course, it’s easy to talk about this type of trading in theory, it’s much more helpful to see real examples, to be able to picture it much more clearly. The best of course is having a teacher in front of you during live trading, and explaining what to do, how to do, when to do, and why to do. This, unfortunately for the vast majority of traders is almost impossible, firstly because of the cost of having a personal trading tutor, and secondly, most people have something which gets in the way of trading, namely a job. Oh, and when you get home from work there are loads of distractions anyway.
Raghee continues, “I am taking advantage of the exhaustion that I am expecting to see at support or resistance. When I say “established” I mean that prices could have exhausted (reversed) at the level before and preferably fairly recently. Recently would qualify for within the lookback or market memory for that time frame. Distribution is sometime a transitional cycle where prices are going from trending to non-trending. But if and when that transition process is able to complete, distribution is what you are left with.”
Trading requires concentration, time and dedication for a true understanding, but checking out examples such as the ones Raghee describes below definitely helps:
