[bronxterp]

99.9% of systems and methods that I see posted on trading message boards are trend or breakout related. Does anyone actually attempt to trade a range? Given that markets range most of the time, wouldn't it make sense to try to capitalize on a ranging market?

[brownsfan019]

Great observation.

Perhaps this is why most of what is sold out there is junk...

Food for thought.

[brownsfan019]

The real question Bronx then is, who is in fact trading during ranges and making money? Since it's not these systems you see on the internet... I wonder...



I think you have a very strong argument for developing a trading system that makes mega-money during ranges and takes minimal hits during trends since we KNOW that the markets range more than they trend...

At least, that's the path I took in my trading career... You see all these wonderful systems and ideas that make money when it's trending, but what you see in real-time is A LOT of up and down, \/\/\/\/\ type moves. So if you KNOW this, why only trade trends or think that the trend is coming that day, at that particular time?

The key is to not get run over during a strong trending move. If you can minimize losses during a strong trend and make some nice coin during ranges, I would argue that you would make MUCH more trading this way vs. a break-out / trend trader; at least on the index futures. Cannot comment on individual stocks.

My personal trading plan profits largely during range bound movements, but has a hint of trend trading with it. Primary goal is to maximize return in range bound or 'choppy' conditions and secondary goal is to minimize losses during trends or with a little luck, come out ahead (usually not that much).

I would like to nominate Bronx's post for post of the year. I don't think TL has a post of the year, but I would like to suggest we have a post of the year contest since the end of this year is soon and then I'd like to nominate Bronx's post for that honor. Why you might ask? B/c this thread has the potential to be the most thought provoking thread on TL. Ever. It could also fall to the waste side as Bronx and I debate the merits of the post.

If you are reading this thread thinking it's a waste of time, you are not there in your trading yet to 'get it'. Hopefully you will. Just do not throw this post aside with the many others floating around TL.

[OAC]

Originally Posted by bronxterp »

99.9% of systems and methods that I see posted on trading message boards are trend or breakout related.

I wouldn't say it is 99.9%. Not even close. I have seen quite a few techniques covered here that are range-related or so-called mean reversion techniques: (1) Jperl's VWAP and Standard Deviations, (2) Market Profile's fading Previous day's high, low, VAH, VAL, (3) Fibonacci Retracement Clusters , (3) Harmonic Patterns such as Gartley, Butterfly, (4) ABC retracement pattern, (5) Andrew's Pitchfork , (6) MACD, RSI Oscillator Divergence, (7) Double Top and Bottom, Head and Shoulder formations, and lastly (8) Most of the candlestick formations are reversal and not continuation patterns.

[smwinc]

Apologies for the long post here--
Trending and Ranges is completely in the eye of the beholder. Timeframe, price range, etc.

I don't think it's worthy of a lengthy discussion about it? If we just look at the most commonly traded US E-mini Index Futures; we all know how important the big money is. The 'institutions' as a group - hedge funds, banks, large proprietary houses - without doubt do not trade a 'trend' system, or a 'range' system. They are (broadly) using (not limited to) quant. models, directional-based, event-based, marcro-economic, long/short, stat. arb, etc. From what I've read of this forum, the calibre of the general forum community know this already.

I think its too easy to get 'caught up' in the world of "little guy" trading. We all have particular ways of getting into and exiting the market - OEC just mentioned plenty.

In my humble view, whatever you trade in whatever way, just understand that. Make it your world - Trade what you see, understand and have experience in. Avoid trying to put things into categories.

as an example, an experience that stuck in my mind:

I remember working with a bank a while back, with an FX desk. They were predominantly proprietary, but their core function included managing risk / exposure for the bank's currency risk, forward positions, sales trades, etc. As far as size, not uncommon to see the desk execute trades at the 100mln Euros level.

Most people have heard of front-running, or have seen it in the markets. I remember the head of the desk explaining, when they had "nothing better to do" they might see a rival bank come in to buy. Not only do they know they bank (they can see the counterparty), they know the guys working in the bank. Similar to seeing Goldman step up to buy in the S&P Pits, but often even more personal. They can usually take a good guess of if it will be a big or small trade. Even if they had a short bias, they will buy up big-time to front run the other bank, before flipping it once the other bank's stopped buying. The other (really amusing) scenario is when the other bank already anticipated this, and never actually wanted to buy in the first place, and reverses short at 10x the size. Anyway..

The point is - - these guys could not care LESS whether we just made a higher lower, etc. It's about knowing your market, and who trades it, and how.

I think a good general 'rule' to new traders would be: imagine asking your query, or telling your 'market information' to someone like the guys detailed above.

In my opinion:

Range bound markets, trending markets, etc -- no.
demand and supply, liquidity, "real" price action -- yes.

There are endless setups out there, but many of them (or the ones that actually work, anyway) boil down to very very similar, core concepts. So when we try and design a trading style, system or methodology - it needs to start with a) Your market b) apply core concepts to it.


SMW

[OAC]

And also Wolfe Waves

[walterw]

Bronx : I personally make good range trades using this methods on this threads : http://www.traderslaboratory.com/for...rade-1994.html http://www.traderslaboratory.com/for...rade-1942.html

they seriously capitalize on the coils that market create permanently...

my favorite is the false break... because the market just doesnt have any intention of going outside the boundaries he already created... hope helps.. cheers Walter.

[OAC]

Originally Posted by brownsfan019 »

If you are reading this thread thinking it's a waste of time, you are not there in your trading yet to 'get it'. Hopefully you will.

I hear you. We all need a repertoire of various tools to adapt to constantly changing market conditions.