Netting Profits By Range Trading

Netting Profits By Range Trading

Submitted by adil on Tue, 08/26/2014 - 16:30

What's Caught in Your Net?

Range trading holds a bit of risk when it comes to trading stocks. The risk is involved especially if a trader, with the help of powerful support, comes across a stock. For trading in a range-trading market, you should point out price-range which is being traded within by security. It involves regulating the level of support. This level is a specific price which is touched by security that has not gone through. Another task you have to do is regulating a level of resistance. This level is a price-range that remains above the trading-range. Just reach out both levels twice. It is a strategy to boost up your confidence. You should reach out the levels a good number of times and build up a trust that they will work well in coming times.

Now making money from it is very simple. You should buy at the level of support. Then you should sell at the other level. Make a sale short at the level of resistance. Then wait and buy to cover at the moment the price lowers to the level of support. Traders should keep their eyes open for breakouts. Leave the price to reach out the line of support or resistance. Make an order of buy stop/sell stop type at a distance from the line. It will be pushed when the price returns. It is a mean of protection against breakout.

We proceed with the example of New York & Company. It is a chain of clothing retail. In the middle of May, its stock dropped to a downtrend. It seemed to be proceeded to support. After a short time, price action re-bounds the support and as a result a short term rally is given until the end of June. Now, in May, if such a rebounding of support by price action is observed, it is a good occasion to buy. But always expect that this move will stay for a short while.

When it gets over, the stock readjusts itself to support. Now it breaks the support. It is time to analyze whether the stock breaks down or the support is powerful. In the end, the price rebounds above support and confirms it. All this happens before it moves to resistance. When the support gets confirmed, you may have viewed a good price-run up. It means that it is a chance of buying. Right after price moving up to resistance, there are a couple of down days. Its reason is that the price was fighting resistance. When three days are gone and still price action is unable to break above resistance, we call it a short sell candidate.

When the price starts soaring up, set you at a long position. When it returns, your position should be short for follow up. You will pocket up hefty profit because it will oscillate within the range.

This type of trading can prove fruitful but one has to learn its basics. Just beware of breakouts.