Playing The Trend

If you are looking to trade trends you will find that sometimes a real trend does not materialize for an extended period. What you may observe is a sideways movement that has a breakout with a short trend and it fades after a relatively small price movement. The trend then falters and falls back down to the previous range high and approximate breakout price.

You may well also observe that the previous market range is equal in size to the new range that is formed from the breakout price to the high price achieved in the minor trend up. This may occur both up and down throughout the entire trading session or trading period. What you may have is a series of sideways range bound price movements separated by minor breakouts.

Your decision is to participate should be based on whether the sideways ranges in these price movements are large enough for you to secure meaningful trading profits. If the answer is yes, then look to buy within the trading ranges on a movement up from support with an expectation to exit at resistance at the upper pricing of the range. When a breakout does occur (eventually it will happen) look for volume confirmation and expect that your price target will probably be from the breakout point plus the range of the previous price movement.

Your trading in range bound markets is usually is more often with this method and you should caution yourself not to over trade. Trade from support to resistance and back again using a leading indicator like stochastics or RSI for guidance.

The worst thing you can do is trade on trends when no there are no real trends developing.

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