I would have to agree with Brownsfan, when you are day trading then most of it is range bound in some way. There are various ways to trade this but most people don't even have a clue how to do it. I would agree that you should know who trades your market, when they are trading, and basically figure out what the big institutions.
But the fact is most people can't even afford the draw down those major institutions can. Why trade like a bank when you have a $100,000 account? If I ran a large fund I would understand and my trading plan would be different. In fact I would definitely want to use quants for part of my business. But if my style of trading consists of trades lasting less than two minutes then I don't really care about what the major banks are doing. I'm more concerned with "reading the tape" and knowing the path of least resistance. If the banks come in and make a big move, chances are I will see it and go along for the ride. I don't care if it's Brownsfan with his money making the move or Goldman Sachs, if the trade fits my plan then I better be in it regardless. Also most smaller traders don't have the knowledge, time, or capital to do quant trading to an extent any bank or fund does (let alone even understand the math behind it). I'll let them write their quants and I'll stick to my 1ES point trades.
Let's look at Friday for example, I would call this a choppy day. We did close up (70 pts I think?) but the simple fact is no one has a trading plan that says buy at the open and sell at the close and actually makes money. If you traded a simple moving average crossover you would have probably 3 good trades and the rest you would have been stopped out. But if you have a plan set up for range bound trading, as you can see in the chart, you would have walked away with a lot more money while the guy trying to find the trend is losing his shirt.
So the questions still stick around, how do you trade the range? Do you buy at support? Well how do you know it's even going to hold, and what is a realistic target? What happens if that support or resistance line breaks, do we switch to a trending setup? Even then, how do we know it's a trend and not a false breakout?
Sorry smwinc if it seemed like I was discounting what you were saying, I wasn't. I'm just saying for a small trader like myself with a very small time frame I think knowing how to trade rangebound vs trend is very important. When I swing trade, that's completely different.
