So the market has moved anywhere in days and you can’t find an entry anywhere. You can’t make a trade right? Wrong, this is just a period in the Forex Market called range trading.
What is range trading?
Range trading is when a currency pair moves in a specific price range with out any significant move in direction. This is where the price moves up and then down like a see saw in a range, when the price gets to the bottom it reverses and goes up when the price goes to the top it reverses and moves back down. This is called a consolidation period when the market is trying to make up it mind about which way it wants to move. A consolidation period usually happens after a large price move and the market stalls because of profit taking. The Forex market operates in consolidation periods about 70% of the time.
The is a forex trading strategy called range trading that can be applied to capitalize on consolidation periods in the market. First you identify the range that is currently taking place. Do this by drawing horizontal lines on your charts on the top and bottom of the range. Then figure the total number of pips in this range, it is best to use a range that is a minimum of 100 pips. Once you have found a good range to use then put on a 14 period RSI on your charts to help you find out if the price is oversold or overbought in addition the RSI will be a confirmation just to add some insurance that this will be a winning trade. So the next step is to watch the price go to the top or bottom of the current range, hit that spot and reverse. I would do this on any chart time frame as long as it is not less than 15 min chart. The longer the time frame the stronger the pattern and better chance of a winning trade. After this when the price starts to reverse enter in the direction of the price on the open of the next 15 minute candle. This way you know the price really did turn and you won’t get beat by a fake out. Also make sure the RSI has reversed and is below 70. when enter you will set your stop at 5 to 7 pips above or below the horizontal lines you drew on your charts. You will want to take profit about 15 pips from the next line that you are headed to. Thats it you have just learned to profitable apply range trading to your forex trading strategies.
This one strategy has helped me increase my profits in currency trading by being able to make trades in a slow period. The important thing to consider is what the current market conditions we are in. This strategy can help you also if you follow the rules and have patience. The Forex market is a great opportunity to those that can govern themselves.
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