Danger Range

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This is it. The killer of any trader, trading system or Expert Advisor. The DANGER RANGE!!! (cue Darth Vader entrance music).

This is the range when no matter what you do it is not right. You go short, it will bounce. You go long it will fall (and then bounce just after stopping you out). Those that claim “trade with the trend” are also caught out as it takes 30 minute to move 5 pips in one direction or another. You get bored. You over-trade. Whatever you do…you get burnt.

In automatic trading systems these are a killer to your weekly profit. Trade more than a couple of times during the range and you could be looking at several days worth of trading to recover.

To top it all off, after the market has absorbed all your trading capital for the day and you decide you can’t rsk trading today, the market wisks off on the only impulse move of the day so far.

The DANGER RANGE!!! is usually a tight range over a long period of time that is slightly trending. It usually has many small highs and lows overlapping each other. All moves within the trend are usually retraced to a large degree and if you trade via indicators which change colour by direction, you will be seeing something that resembles a string of coloured Christmas Tree lights on your charts.

The chart below shows a decent example of this DANGER RANGE!!!

Click to enlarge

You can see that the move actually rises 0.4% over a couple of hours but it so choppy that even the best indicators will get caught out. And most likely the price action guys will also have got faked into a trade.

The key is to recognise these ranges before it is too late. Obviously price action traders will be more used to seeing these ranges and may already have a plan to deal with such sessions. But if you don’t have any ideas here are a few suggestions:-

1) Trade with the trend-You may still get caught out but it will be less than against the trend.
2) Limit the number of losing trades you will take before quiting for the day.
3) Have a set number of trades per day full stop.
4) Take a break after every trade. This will reduce time in the market across a whole session.
5) Factor these days into your trading system or method.

2 Responses

  1. Wellsfargo Online Banking says:

    All moves within the trend are usually retraced to a large degree and if you trade via indicators which change colour by direction.

  2. P the cable guy says:

    Using rule number one alone will save you a lot of losted pips because momentum is carrying you to profits and always have a profit target, remember the last dollar is for the next guy. Because if they aren’t paying you, you are paying them. I like to get paid, never let your profits run.

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