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Thread: Price action trading in sideways market

  1. #1
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    Price action trading in sideways market

    Hi traders! Value trader is back.

    In this artice I will share with you some robust principles for trading inside a rotational market - I use them on a regular basis in my own trading. There’s nothing new about the fact that around 70% of entire trading activity occurs within a trading range (it concern currency market, of course - for commodities and stocks distribution is pretty different). Well, it doesn’t mean that the only way to obtain 80% of winning trades is to fade the price action. But it means that to trade successfully in rotational market, trader has to know the mechanics of rotational market.

    How one can identify trading range? Some traders do very simple thing - they connect extremes between each other and make conclusion that they know where ”border” of a trading range is.

    Attachment 12288

    But this way can be misleading - how do you know that any taken extreme is important and will not be renewed? According to my experience, it’s much easier to identify rotational center than border of the trading range.

    Rotational center:

    The best way to describe rotational center is to think of a simple moving average. Price gets back ro average, then moves away from it. Volatilty of swings to both directions tends to be similar:

    Attachment 12289

    But moving average may not be very accurate in real trading, because it performs well only in slow market with low volatility. In other circumstances it will lean to price, leaving trader confused about location of rotational center.

    In my trading, I use several clues, that help me know that I identify rotational center correctly. They are: “Emply candlesticks”, “Low volatility areas”, “Rail formations” and simple price probes. (I use M30 chart in my analysis, you should adapt principles shown below to your timeframe).

    Empty candlesticks:

    If I see candlestick with very elongated candlestick, I expect rotational center to occur somewhere within the body of that candlestick.

    Attachment 12290

    Rail formations:

    The same thing is with rail formations. If I see 2 candlesticks located close to each other, I expect rotational center to be located within this formation.

    Attachment 12292

    Low volatility areas:

    And the most important clue is area with extremely low volatility. On my preferred timeframe (M30) it is represented with sequence of several “doji” candlesticks (having very small bodies):

    Attachment 12291

    When I combine all clues together, I can get the idea of rotational center. And in many cases, it is not overlapping with moving average, that is, lagging indicator by its nature:

    P.S. I will keep this thread closed to comments, until description will be completed (to avoid questions, that are going to be covered later).

    to be continued...

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    Last edited by Value trader; 03-02-2015 at 07:02 PM.

  2. #951
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    Quote Originally Posted by Ehis View Post
    Ignoring learning on the demo account is a thing which I can say happened to almost every forex trader, it seems like a waste of time for most of us, we needed something that would quickly make money for us, however after we got beaten black and blue by the forex market, we will always remember that there is a new and better way to learn which is the demo account.
    I think if any trader ignore then practice and learning then he have not make good or successfully trade strategy in the forex market. Waste of time is not good for trader because in this way he can always make bad trading strategy after result it he can loss strategy and big money in the forex market.

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  3. #952
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    Following price action in forex have been one of the very profitable means that have always given us the chance to work for the best trading and see we got to achieve that which can truly give us everything that will bring profits. In a side way market, good price action helps us to know what we should be doing at the best time and give us the right potential to take on the right trade that will put us on the map to profit good.

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  4. #953
    Trader Lyon's Avatar
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    My trading concept will never allow me to trade with the side ways market. I have learned and I know how the market works. To me, the side ways market is more like a trading method whereas the trader trades the slow market movement . Therefore that is the reason why I focused on trading with the use of the trend market movement, trend trading is a best way of trading.

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  5. #954
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    side way is the condition where the market has narrow range movements and it will become hard point for traders to determine the position with long time trading methods. so, the point should be analyzed first is the market condition first, take high time frames to see the true trend and then what news behind the market condition, this really helpful for us to make better approaches to the market
    one thing, at the end of sideway, usually there is a fast movements with wide range, and if traders has good skill , they will get good earning from it

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