RANGE TRADING IN DAY TRADING

Range trading is a common way to find profits in the stock market.

Traders identify a stock which trades between a high and low

price.

They aim to buy at the bottom of the cycle and sell at the top.

This approach works over the long term as the economy moves

between boom and recession.

However range trading in day trading works as well to generate

profits.

When range trading in day trading the trader seeks to indentify a

trading range and will continue his approach until the stock in

question breaks out of the range.

At that time the trader may engage in trend following in day trading as the stock rises or falls until it find

another trading range.

At that time the trader can resume range trading in day trading.

Identifying a Trading Range

When range trading in day trading, it is necessary to establish that

there is, in fact, a trading range.

Traders do this using two means.

One means is fundamental analysis.

Fundamental analysis of the stock in question will commonly tell the

trader a general value around which the price will revolve.

For example, a power company has an established customer base and

fixed charges.

Its costs may go up or down with cost of coal, natural gas, or the

costs of generating nuclear power.

This sort of company pays good dividends and the stock price is

commonly driven by interest rates as compared to the dividend it

pays.

Thus the stock price will tend to fluctuate up and down contrary to

interest rates.

When range trading in day trading, traders can focus on the news

regarding interest rates in order to trade within a range.

In general range trading in day trading works best in moderately

active markets but not in extremely volatile stock trading.

Knowing when to Buy and When to Sell

When range trading in day trading, the trader expects the stock to stay

within its range.

However, stocks also break out of ranges.

Thus the trader will commonly use technical analysis of the stock in question in order to understand

market sentiment and trade accordingly.

A basic system that works well for many traders is that of Japanese

candlestick signals.

This is a system of pictorial symbols superimposed on a stock

chart.

The “candlestick” tells the trader if the stock has gone up or down

during the period, what it opened and closed at and how high or low

outside of the range it traded.

Candlesticks are commonly used to denote a day’s trading but can

be used for hours and even minutes.

They are infallible but do function to give the busy trader a quick

heads up as to changing market sentiment.

When range trading in day trading it is important that the trader not

fall prey to the psychology of trading.

When range trading in day trading it is important that the trader not

fall prey to the psychology of trading.

He must remain objective and be willing to give up the chance of getting just a little more profit

before the stock turns and reverses.

Greed and fear are eternal enemy of the day trader.

When trading within a range it is wise to accept reasonable returns at every turn of the market and to

do so again and again.

For more insights and useful information regarding stock,

options, commodities, and futures trading visit

www.ProfitableTradingTips.com.