Tuesday, March 22, 2011

Small range days

Small range days are extremely choppy and usually higher risk since every trade needs to be a scalp. Price action will be hard to read and bars will usually look terrible. In general I avoid trading these days and often take no trades. You need to be an excellent scalper with a high percentage of success to trade these days.

Bars that had a small range the previous day and open with no gap or tiny gap (less than one bar) are candidates for small range days. If the first few two legged moves do not go too far and are made of overlapping bars, there is a good chance it will be small range day.

On days like this, do not expect any move to go much beyond the previous swing point. Counter-trend trades are extremely unproductive since the price is unlikely to move beyond a couple of points off your entry.

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