How do you determine/predict if it's a RANGE day or TREND day?
I searched forum found two topics but didn't find it much useful other than term called "JFC Directional Day Filter Indicator" so to all the pros out there what method do you use to determine/predict if it will be a RANGE or TREND day...I am not looking for holy grail indicator...just the process...
This is a very broad question. First of all, you must ask yourself what is happening on the daily chart, is the daily chart trending or ranging. You can determine this by looking at the lows and highs. Generally speaking if making higher highs and higher low it is up trend and other way it is down trend. Using trendlines will help you get a sense of this. If you connect highs and lows with a trendline and it is going sideways, then it is probably in consolidation.
Once you understand the daily trend, you can start looking at the market structure and the bar patterns. For example if in a downtrend on the daily, and price has moved back 50% or more from the last lowest low, then there is a good chance you will start to see a retest of that lowest low. So if you are trading intraday you should look for movement towards the previous day low, and if it breaks and continues know that you have a great chance of it running all the way down to that previous swing low on the daily chart and possibly to some % extension. This is all very general of but hopefully it gives you an idea how to think about these things.
The following 3 users say Thank You to jkingcapital for this post:
A lot of this depends on the market context. For example, you could be in a range / balance area mature for breakout. A contraction in volatility might highlight the impending breakout etc. The idea is to see and understand the market context and draw the scenarios that are probable. Once you identify the scenarios, look for supporting evidence intraday that points to a probable scenario. For e.g market has been developing below a recent range high for few days and one of your possible scenario is the breakout from that range. During open you could look for Open Drive behavior, tight early balance, high volume during Initial Balance period, supporting Market Internals etc to judge the probability of a breakout.
As a beginner trader, I created a checklist of items I do for end of the day analysis and highlight the probable scenarios. I also have a pre market checklist for what I look for, things like , where price is trading with relation to previous days range, whether the market is going to open in balance or imbalance, inside value etc.
The point is , you will need some structure in breaking down and analyzing the market as a beginner. Eventually this will help in anticipating and detecting the probable scenarios, including day types.
The following 2 users say Thank You to rahulgopi for this post:
look to see if the previous days have been trending, if so figure out why. You have to use your judgement on if price is over bought or sold depending on what economic news is out and the over all picture. Has a level been breached on the daily time frame like an all time high or low of the overall weekly or monthly range?
Generally speaking usually range days happen after subsequent trend days. There's no exact way of knowing, you have to use your judgement. The traders who determine range or chop aren't making their decision solely on charts.
The following user says Thank You to Itchymoku for this post:
Why predict the range day vs the trend day when you can have a trade strategy to cover both at the same time. I trade the TF with 2 contracts. The first one has a 10 tick target and then I go to break even +1 stop for the second which is the runner. I trail the runner automatically by 10 ticks until it comes back to take me out.
This way I have satisfied the range day itch with 10 ticks + 1 tick when it come back quick on the second contract. I have also satisfied the Trend day when the runner continues to go and maybe captures 30 to 40 ticks.
Its the best way to cover both the range and the trend day. I have also learned not to intervene on the strategy trail. Because if you do....you often cut the winner shorter than if you let it play out. In other words, once the trade is entered...let the auto strategy play out to its fullest..and let the market take you out with what it will give you.