How to trade ranges
PA is comprised of trending PA and ranging PA. You can either specialize in one or know how to trade both and lately in crypto I’ve been trading ranges a lot more than before.
This will be a quick introduction on how to draw and trade a range.
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PA is comprised of trending PA and ranging PA. You can either specialize in one or know how to trade both and lately in crypto I’ve been trading ranges a lot more than before.
This will be a quick introduction on how to draw and trade a range.
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How to identify a range
Usually after a big impulsive move, price creates 2 clear swing points (high and low) that don’t get broken (only swept) for a while, until price decides what to do next.
This is a nice example of ranging PA on $BTC:
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Usually after a big impulsive move, price creates 2 clear swing points (high and low) that don’t get broken (only swept) for a while, until price decides what to do next.
This is a nice example of ranging PA on $BTC:
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How to draw a range
Draw a parallel channel between the 2 swing points, starting from the first one up until the price exits the range or the last candle if price is still ranging.
The 2 swing points are sometimes up to debate, choose the ones that make the most sense.
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Draw a parallel channel between the 2 swing points, starting from the first one up until the price exits the range or the last candle if price is still ranging.
The 2 swing points are sometimes up to debate, choose the ones that make the most sense.
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Range highs / lows sweep
It’s EV+ to long range lows and short range highs instead of treating it as price breaking support or resistance. Most of the times, price sweeps one side of the range and then returns to the range eq (middle).
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It’s EV+ to long range lows and short range highs instead of treating it as price breaking support or resistance. Most of the times, price sweeps one side of the range and then returns to the range eq (middle).
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This would be a textbook trade:
- sweep of range lows / highs
- return inside the range without treating range lows as resistance / range highs as support
- retest range lows as support / range highs as resistance
- return to range EQ
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- sweep of range lows / highs
- return inside the range without treating range lows as resistance / range highs as support
- retest range lows as support / range highs as resistance
- return to range EQ
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When does price exit the range?
It’s often clear after a few candles, so it’s better to wait for confirmation.
Usually, a big impulsive move through the range limits is enough or you can see clear bearish PA below range lows / bullish PA above range highs.
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It’s often clear after a few candles, so it’s better to wait for confirmation.
Usually, a big impulsive move through the range limits is enough or you can see clear bearish PA below range lows / bullish PA above range highs.
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The second scenario is easier to trade:
- price goes above range highs / below range lows
- price does not go back inside the range, range highs becoming support / lows becoming resistance
- price makes a new high / low
- only then you should long / short
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- price goes above range highs / below range lows
- price does not go back inside the range, range highs becoming support / lows becoming resistance
- price makes a new high / low
- only then you should long / short
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These are ideal scenarios which you will almost never encounter. Maybe the range retest is not perfect for a range exit, maybe you don’t get a clear BoS after a sweep.
When to trade ranges also comes with experience, so paper trade or observe ranging PA before trading it.
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When to trade ranges also comes with experience, so paper trade or observe ranging PA before trading it.
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Another useful tool to get more trading opportunities or to use as confluence to get the best setup is the periodic volume profile, but I will go over that in the next thread, which should come in the next few days as it warrants its own thread.
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Hopefully this introduction to range trading has been useful to you, and as always feel free to ask any questions!
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