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Profitable strategies in range trading conditions

  • Post #1
  • Quote
  • First Post: May 3, 2005 12:55am May 3, 2005 12:55am
Statistically 80% of the time the market is not trending.
I’m wondering if somebody developed so far a profitable strategy trading in sideways market ?
Statistically 80% of the time the market is not trending.
I’m wondering if somebody developed so far a profitable strategy trading in sideways market ?



This is only true if you limit yourself to one time period. An issue may only be trending 20 percent of the time on the daily, for example, but if you scale down to the 4 hr, 2hr, Hourly, etc. you will find trends that are quite tradeable.

The key is adjusting stops and profit targets to fit the range of the time period. For instance, I trade a lot off the 1 hr charts and find that a 50 pip profit is a good place to exit 1/2 of my trade, and a 30 pip initial stoploss is usually sufficient (sometimes even less depending on the techs.) However the same issue on the 4 hr or 30 minute would require different profit targets and stops to be "efficient." I put that in quotes because no matter how "efficient" one tries to make their system (usually in back testing) the market will find a way to outdo them.

One key element of trading that it has taken me over a decade to "own" is that I can NEVER get the top AND bottom exactly. I may get one or the other, or I may come close to both, but I've become quite content with a chunk out of the middle and since becoming satisfied with that, my trades have gone from mostly unprofitable to profitable on a regular and consistent basis.

Chris
Quoting dylgeah
The key is adjusting stops and profit targets to fit the range of the time period.
Absolutely. I'm just starting to realize the significance of this myself.

Quoting dylgeah
One key element of trading that it has taken me over a decade to "own" is that I can NEVER get the top AND bottom exactly. I may get one or the other, or I may come close to both, but I've become quite content with a chunk out of the middle and since becoming satisfied with that, my trades have gone from mostly unprofitable to profitable on a regular and consistent basis. Chris
Do you trade live?
Quoting hun83
Statistically 80% of the time the market is not trending.
I’m wondering if somebody developed so far a profitable strategy trading in sideways market ?
sideways market is when you want to use a reversal type strategy. something that sells on overbought conditions, and does the reverse for the buy.

the real trick is finding the indicator that tells you that you are in a range. i know of only one, and it starts with an A.
Relax and be happy.
Quoting merlin
sideways market is when you want to use a reversal type strategy. something that sells on overbought conditions, and does the reverse for the buy.

the real trick is finding the indicator that tells you that you are in a range. i know of only one, and it starts with an A.
Merlin with your every post I mine a small quality of gold. Ok master should I be overly concerned about the lag or be happy to grab a part of the middle? Actually just knowing that the market is in a range should save me a ton of money for my trading style
I think I remember Marcel Link suggesting using the ADX to define wether a market is trending or range bound, and if range bound, using slow stochastics as an exit signal.

I've never actually traded this way, but I have worked it into strategies I was testing and I think it could be very effective.

DQ
If you trade without a sense of humility, one will be provided for you.
Quoting QFX67
I think I remember Marcel Link suggesting using the ADX to define wether a market is trending or range bound, and if range bound, using slow stochastics as an exit signal.

I've never actually traded this way, but I have worked it into strategies I was testing and I think it could be very effective.

DQ
you got it man!

Link does talk about the ADX, but he doesnt do it near the justice as Charles Lebeau.
Relax and be happy.
Quoting bluemonkey
Merlin with your every post I mine a small quality of gold. Ok master should I be overly concerned about the lag or be happy to grab a part of the middle? Actually just knowing that the market is in a range should save me a ton of money for my trading style
glad i could be of help buddy but just so you know, i am only helping you for my own personal benefit, because i know one day you will be a rich trader and give me some money

as for your question...grab the middle, and have a strategy that tries to grab the beginning too. dont try to exploit every market opportunity with a single strategy. it could take 5 or 6 strategies to cover all market conditions.
Relax and be happy.
Quoting merlin
sideways market is when you want to use a reversal type strategy. something that sells on overbought conditions, and does the reverse for the buy.

the real trick is finding the indicator that tells you that you are in a range. i know of only one, and it starts with an A.
Merlin

Do you think it is possible to use Kaufmans' ER as an indicator to indicate range/trend as well?
there's nothing ore dangerous than range trading.as there's nothing more dangerous than trading market that's undecided.KEEPOFF ranges trade TREND
Quoting hun83
Statistically 80% of the time the market is not trending. I’m wondering if somebody developed so far a profitable strategy trading in sideways market ?
"Buy low, sell high, scalp" © Al Brooks
if range is wide, can even swing part of position, allowing some pullback, but targeting higher R:R

Statistically 80% of range breakouts fail, so even this single observation can make money in ranging markets if properly exploited

in the end, all come to early identification of trend transitioning into range and it can be achieved by reading PA
  • Post #12
  • Quote
  • Edited at 11:45am Sep 28, 2014 11:25am | Edited at 11:45am
Yes, I am a range trader. I do not trade sideways though?? That does not make sense. You only profit when price moves up or down. I trade 5M charts to give myself the most range of price movement opportunities that can be accurately measured most of the time.

I saw mention of other time frames on your thread, but you can easily compensate for other time frames by adding higher moving averages on your chart, and by overlaying higher moving averages on the indicators you use. For instance, since I trade 5M charts, I can also see the 15M and 30M signals on my 5M chart by simply adding a few moving averages here and there. I have no need to see anything higher than that since I generally make 6-8 trades per day. I need to stay close to the current action. The number of trades per day is a direct reflection of trading ranges. It also just depends on the daily market pattern. I have seen days where I only make 3 trades, and those are all really just "take profit" points because I did not trade the reversal as the signal never got strong enough.

In my opinion, developing a range trading system, and then overlaying your range signals with moving averages that can effectively make it also capable of trading intra-day trends is the most profitable way to trade. However, it is a full-time strategy. If you are not able to trade full-time then I would suggest using a trend trading system that will allow you to "set it and forget it".
You cannot be extraordinary by being normal
  • Post #13
  • Quote
  • Edited at 11:42am Sep 28, 2014 11:29am | Edited at 11:42am
Quoting bluemonkey
{quote} Merlin with your every post I mine a small quality of gold. Ok master should I be overly concerned about the lag or be happy to grab a part of the middle? Actually just knowing that the market is in a range should save me a ton of money for my trading style
The indicator I use that accurately displays when you are in consolidation, when the consolidation ends, which direction price is going when it ends, and even when that trade ends...starts with a Q. Even if you figure out the indicator though, you need the proper inputs to design it. But, it is possible for those that persevere ... and even profitable

Sorry, but I have no use for the ADX. Great for those that do though. Too slow and too unpredictable for my strategy. I only use tools that are accurate. I learned many years ago to not force something to work just because I want it to work. I sifted through my indicator analysis and chose only the tools that worked most of the time. Then designed my system. Along the way I have made adjustments sure, but I never made any money until I targeted the middle of the range. When I stopped opening trades at perceived highs, and closing trades at perceived lows, and instead allowed a more loose interpretation of market activity dictate my entries and exits, I began to profit on nearly every trade. I don't get all the pips, but I also only lose 1-2 trades a week, and those are generally limited to the spread. If you closely analyze the action between the high and low (low and high), you will discover that in most cases, there are still flat zones before price actually moves vertically into profit. If you target your signals to the end of the flat zone and the beginning of the most profitable movement, rather than the "high" and "low", then you will find yourself only trading when the market is moving in your predicted direction. In more simpler terms, you need to measure to a point just beyond the high or low and then trade from that point to the next point on the other side.

Good Luck.
You cannot be extraordinary by being normal
determining range market easly been done by ATR. the main issue about that is when it gonna end.
while it most of te time ends with big single bar which collets the Stop Loses placed around.
My Best Trade is Next Trade!
so the question is not
when it starts instead the Q is when it ends..!

Quoting MAM.Trader
determining range market easly been done by ATR. the main issue about that is when it gonna end. while it most of te time ends with big single bar which collets the Stop Loses placed around.
My Best Trade is Next Trade!
Quoting MAM.Trader
so the question is not when it starts instead the Q is when it ends..! {quote}
? Not sure I understand your question. I know when to enter and exit. It took me many years to figure it out though. Unless you are super lucky or super good, it will take time for you to figure it out. I was referring to a comment about the ADX. I have a found a better way to define and measure consolidation. That is all I was saying. Keep looking and exploring.

I don't use ATR. If you do, wonderful. I find it is yesterday's news, lol. I trade forward, not backward.
You cannot be extraordinary by being normal
if there was no spread we could benefit from 99% of the ranges !
but now we've to pay two times for the spread: when entering the position and when closing it or hitting tp or sl.
so it's very hard to haunt small ranges.
dear super trader
I put my idea. nothing related with your super trading skills & super duper indicators & super forecasting ability.
I saw many super cartoons in my life.

happy trading

Quoting dkrock
{quote} ? Not sure I understand your question. I know when to enter and exit. It took me many years to figure it out though. Unless you are super lucky or super good, it will take time for you to figure it out. I was referring to a comment about the ADX. I have a found a better way to define and measure consolidation. That is all I was saying. Keep looking and exploring. I don't use ATR. If you do, wonderful. I find it is yesterday's news, lol. I trade forward, not backward.
My Best Trade is Next Trade!
the best way to determine range markets is MA applied Atr.
how?
the rest is yours.

excuse me, I dont have indicators coded by MIT & radar powered 6th sense.
My Best Trade is Next Trade!
Quoting MAM.Trader
dear super trader I put my idea. nothing related with your super trading skills & super duper indicators & super forecasting ability. I saw many super cartoons in my life. happy trading {quote}
Sorry to invoke an emotional response from you. That isn't good. You should approach trading with an open mind and as a serious business. Emotions have a tendency to produce negative trading results.

Not a real big fan of being called smart-azz comments either. If you are not serious about trading, you should limit your comments. I trade for a living and so I actually do know one or two things about this business. My comments are not meant to offend, and I am pretty sure I did not call anyone any names? I simply referred to the "tools", not the person. Immature comments, emotional responses, and incorrect tools can restrict a person from finding profit.

If your method works, great. If you have a closed-mind and believe your way is the only way, that is great too. ATR is measuring the range of the market based on the number of periods you input, but has very little (if anything) to do with range trading. Range trading refers to price moving up and down in a "cycle", rather than continuing in one direction or the other. The ATR is measuring the "length" of a candle, or series of candles, from their high/low, and as such provides no predictive capabilities as to when price changes direction. It can tell you when the size of the candles change, but for me, that has nothing to do with making profit. I welcome you to provide some chart examples of your technique as they would more substantially support your comments than merely spouting off juvenile remarks.

For the rest of the people that read this thread though, there are alternative methods to find profitable trades. Do not let people who make immature comments prevent you from profiting in your business. You can walk in any mall or restaurant and see these clowns all over the place, but it does not stop you from shopping or eating. Just ignore them and keep working on your business. Don't be afraid to offer your suggestions, or ask questions, on any thread.
You cannot be extraordinary by being normal
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