The best way I have found to identify a ranging or trending day is to observe a daily chart and decide if we are trading within the previous days range. If so then I would consider it a range day. The opposite is true if price is traveling outside the previous days range there begins a continuation of trend or a reversal of trend.
Hope that helps and best of trading to you.
Strategies that use an oscillator such as Stochastic or RSI and work well in a range bound market...
Volatility indicators such as Bollinger Bands or Keltner Bands can also provide signals...
Get creative...for example...If Daytrading on smaller time frames such in markets like the E-Mini S&P try using a second data stream such as the tick to time your entries to extremes on a Bollinger Band...
All markets 'Trend', ie: produce several large Swings during a trading session, you just have to find the lowest tradeable timeframe you can use pullback trading on.
The SIF's are typically a Ranging Market, but you can Trend trade them with the right timeframe & trading style.
Example: 5m chart of @NQ may Trend well several times a month, but not every day, if you are trying to day trade it with a Trending Setup.
However, the same market on a 400 tick chart will trend well enough every single day (rare narrow range days being the exception) for you to trade pullbacks with the trend & produce daily income (this style is in between scalping & day trading, due to the lower timeframe).
The problem with Fading the Range, is what happens the 20%+ of the time when the Market Trends; you lose. Fading Range Highs & Lows can work, but it is best to back-test & create a set of Rules to keep yourself out of trouble, ie: never take the 4th test (3rd test for some) of a S/R Level, etc. Also, looking at the Initial Balance & being able to recognize Market Profile Day Types will be helpful.
Just my 2 cents....
The following user says Thank You to CH888 for this post:
I agree with your 2 cents, though when you trade the lower time frames you are much more subject to whipsaws and trading directly against HFT algos.
I've heard it put like this,You tell a friend you've known for a year something and you can be pretty sure how they will react now tell the same thing to someone you just met 5 minutes ago and you have know idea there response you can only hope they take it well.
Food for thought,
all the best.
Every trend you see is just part of a larger range. You basically want to find points in price structure where price leaves and is not likely to retrace back. Even if you can find a point like this that has a 50% chance of going in either direction and you're not sure, you can make money by cutting your losers short, scaling out some profit, and most importantly letting your winners run.
Here's a crude drawing of what I'm referring to, If you enter long or short at the grey line you can make money given enough occurrences of trades with this type of setup because your reward outweighs your risk.
(I put two hypothetical stop losses as horizontal lines corresponding with their price paths for a frame of reference)
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