Part IV
Trading Ranges
The broadest and most useful definition of a trading range is that it is simply an area of two-sided trading. It can be as small as a single bar (a doji bar) or larger than all of the bars on your screen. It can be mostly horizontal, which indicates that the bulls and bears are in balance, or it can be slightly sloping. If it slopes up, the bulls are more aggressive. If it slopes down, the bears are stronger. If it slopes too much, it should be considered to be a trend channel and not a trading range. It can have very large swings lasting many bars or it can be very tight with each swing lasting only a bar or so, creating a narrow channel. When it is horizontal, the lines that contain it are support and resistance lines, with the support line below and the resistance line above.
The term trading range is usually applied to any section of a chart that is not trending and is mostly horizontal, but using the broader definition is more useful to traders because once you know that there is two-sided trading, you can look for opportunities to trade in both directions. Many beginners are too eager to look for reversals and can't resist trading them before the market is likely enough to transition from a trend to a trading range. However, once there is enough evidence that the transition is taking place, there are often high probability countertrend scalp and even swing setups. The key is to wait for enough evidence before taking them. Some patterns are usually ...
