Identifying Buy And Sell Zones: Part 1

Sophia Todorova has a background in teaching and psychology, and as such relishes the idea of assisting new traders on their journey to Forex trading success. Technical Analysis is her passion. The charts speak, and she listens.

Regardless of your preferred trading strategy, it is essential that we as traders are able to identify buy zones and sell zones. I use trendlines and horizontal lines to do this. I will be doing a series of articles on this topic, and today’s will focus on range trading. During a ranging market it is appropriate to use horizontal lines to differentiate between the buy and sell zones, and so the trader is able to take advantage of trading opportunities. This information is particularly useful to beginner traders, as it provides options as to what to look for in trade setups.

Many persons trade ranges exclusively, and it is a strategy that usually offers very good reward relative to the risk being taken. Profit target is the opposite end of the range, while the stop-loss is generally placed above/below the reversal signal at either end of the range. Below is a chart labeled accordingly:

I hope this proves to be useful for you. If there are any other particular topics you would like me to cover, please let me know. Thanks, and successful trading! 🙂

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  • Rahim3973

    Thank you Sophia for this Post.I am new in trading. I would be very glad if you could define the real meaning of hedging in relation to fx market and how we use it as a strategy in trading.Looking forward to reading yr future articles.Thank you.

  • Hi Tokbi79, The strategy has worked very well for me in the past. Of course there are time when it will fail, like every other strategy. Some ranges ore more choppy than others, so we can choose to trade only the ones which are cleaner and more uniformed. Thanks for reading and sharing! 🙂

  • YW, Joe. Thanks for reading. The reversal signals can be tweezer tops and bottoms, pinbars, engulfing bars, etc. Sometimes you’ll need to turn to a smaller timeframe to identify the entry signals. For instance, the above is a 4hr chart. A single spike on that timeframe would be tweezer tops/bottoms on a 15-minute or hourly chart. Thanks again!

  • Tokbi79

    Hi, I tried that strategy but it didn’t work out. It seems like “stop hunting” is real…

  • joe

    thnks sSophie, as usual, brief and useful, can u explain on the chart which is the reversal signal, or how we identify the reversal signal…thx