Range Forex Trading Strategy
Range trading is the advantage of lateral movements of the price. Range trading strategies are needed eg for futures trading in the stock market and of course currency trading (Forex), which is eminently suitable range trading strategies. To be a successful range trading strategy to you several steps.
Suppose that there is a range
You can use several methods to determine a price to the ranks, but the easiest (and no less accurate) is to make use of Bollinger Bands and your own common sense, namely by the forex charts to see that match the period within which you usually trade, and to search for the resistance and support levels. Is the price at least 1 times came back from a resistance and support levels, then it is probably a range of shaping. (More about identifying a potential range trade). See for example the chart of the currency pair USD / JPY below. The Bollinger Bands show here clearly show the range within which is a channel that may emerge from the second time that the low is not broken.
Determine the entry point for the trade (the trigger)
A good entry point for the trade is the first corrective candle that brings price back within the range after it had broken through there first. You should first candle closing outside the range. Then there must be a candle within the range close to the trade to trigger. This way you create a setup that is based on the hypothesis that the price to the ranks is. It is always the price again by the resistance / support level shooting, but there you have to stop losses. Your task in determining the best entry point is to establish a point where all signals are on green for a nice profitable trade.
set stop loss and take profit in
Your stop loss should you turn just past the peak / valley by which the price range going broke in the Forex, before he withdrew. Your hypothesis is that the price goes back within the range occurred, if the price instead again by the resistance / support level and break through to an even higher peak / valley to make even deeper, then your hypothesis is not knocked out and you the trade steps.
You set your take profit in just past the resistance / support level on the other side of the range, where you as it is good for on the go. Your hypothesis is that the price peaks beyond the first resistance / support level and then back again within the range to return.
Chase not the breakout when you stop / loss triggered
It is tempting to open a Forex position which speculates on the breakout which you stop / loss is triggered. The idea then is that because you stop / loss is triggered, there is almost by definition there must be a breakout (this is of course nonsense, but you have not chosen anything hand, it is difficult to see that you just your stop / loss put the wrong one) and that you want to make good loss by now jumping on the breakout.
There may of course be a real breakout, but more often you will increase your losses by semi-committed to a breakout occurred that go very well be a false breakout may prove to be. If you've selected the range trade is better to stay put if you stopped making hits out to re-analyze the most likely rate pattern for the currency pair.
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