Market Range.

In the business of financial trading, whether you trade/invest in stocks, forex, futures, options or any other financial product, there are no guarantees. You must take the good with the bad. Take the risk in order to potentially get the reward.

However before you can speak about what risks to take that have potential for a greater reward. You must understand that rule number 1 in financial speculation is SURVIVAL. Capital preservation. I say this due to the fact that sometimes the markets that you may be trading are not "ripe" enough to put your hard earned capital at risk. To put it simply markets tend to go through periods of RANGE. Also known as consolidation, an area of pricing where markets bounce back and forth up and down going SIDEWAYS with no general overall directional bias. Without getting into to much detail in a blog post, just know market ranges are all relative to certain time frames (i.e Weekly/Daily down to 5min ranges)

During these periods of ranges and consolidations it could be quite frustrating calling the next move in the markets as it could be a lot of back and forth action with no follow thru one way in prices. During these periods most traders are stuck in range, of not being really "RIGHT" but also not being "WRONG" either, as every move in your chosen direction you "think" it will break out in your favor - only to have the next move opposite of yours and showing signs of a potential stop out... only to have the process happen over and over until you either get completely out of a trade due to range and/or getting "chopped up" within the markets range.

Nobody knows for sure when the buyers vs. seller battle is going to cause range. They happen at certain levels and could last longer than your emotional state and/or account balance.

However few things that could help with this...

1. Have a "range bound" trading strategy with RULES to identify a range market (on your criterion and trade plan) and trade the range back and forth- until a break, close and confirm of range violation.

2. Get out/ Stay away from range bound markets when properly identified and resume trading after confirmed breaks and hold OUT of ranges- to then potentially trade more trend-like strategies on given markets.

3. Have multiple/separate trade plans to deal with BOTH range bound markets AND trending markets. Example: if trend strategy is slowing or no longer yielding return and showing/proving signs of range. STOP trading trend strategy and like a robot flip over to the range bound market strategy. Until it proves to no longer respect the range and is now potentially beginning a NEW TREND, for you now to flip to that trend strategy.

Understand that range traders take losses when ranges break and are now trending. Vise versa: trend traders take losses when markets STOP trending and consolidate in a RANGE.

In my humble opinion - the worst thing you can do is not identify the markets changing context of trend to range, or range to trend, and keep taking trades either within a range with no directional bias, giving your capital away with no edge - or continue taking counter trend trades hoping to have it reverse at your entry to go back within the range. Which typically results in the trader always going against the market and out of CONTEXT with it!!

The professional trader knows the market he/she trades- whether its a trending or range CONDITION. Understands what strategy to use at that TIME AND CONTEXT. Or just elects to stay out for capital preservation for the proper CONDITIONS that that trader has been trained to trade via strategy and execution. Tailor yourself to changing markets and suit up for the proper strategy at the right time.

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Tailored Trader