Trading range and stocks analysis

Stock, ETFs but also currencies and commodities trade a lot of time without major direction and in established trading range. They spend a lot of time in a such price area and so you have to master the analysis of this situation.

You have to put rules what to do when markets or your tickers are in the trading range mode. This is a very common time period as stocks spend as much as 70% of the time in a trading range.

Trading range basics

This situation can be found when shares finish its strong trend move. Investors are closing their positions. That means that last leg of uptrend or downtrend is finished by strong and huge pullback. Such pullback can be measured by Fibonacci retracement levels as important trend-reversing pullback (above 60% pullback move).

Also such pullback is accompanied with huge trading volume. As you can know, strong volume after strong trend often signalize important top or bottom in price.

The price starts to fluctuate between two important levels of support and resistance. The easiest way to identify this range sideways situation is to check a chart:

You see that price is moving without any significant trend in some form of range. There is not easy to find higher high and lows of this range. Price is crossing moving averages up and down too often. Also volume cannot provide any additional hint.

Ideas for range stock market strategies

The best action for traders seeing trading range is to avoid trading of such a stock. It is not easy to trade trading range. But if you want to include some range trading strategy into your trading system then here are some recommendations for you.

First be patient. Wait for price to reach and touch support or resistance of such range. Then wait again for
reversal candlestick it can show you that price has tendency to pullback from such important level.

You have to use very tight stop loss for such trade as you never know if the price is going to break under or above such price range.