Many friends enjoy following trends because they believe that trends can capture significant market movements. Sometimes, a single trend can lead to substantial profits, and in some cases, even the possibility of getting rich overnight.

Many famous trading legends in the market are created by trends, which is why the idea of trend trading is very popular.

However, when we engage in actual trading, we find that trend markets are the exception, while range-bound markets are the norm. To catch a significant trend, one inevitably has to endure a series of consecutive stop losses in a range-bound market, which is really difficult to persist with. The fear of not seeing the light is extremely against human nature.

That's why I changed my approach early on and began to study how to make money in the majority of range-bound markets, which reduced the impact of human nature on my trading results and achieved stable profits.

Today, I will share 4 practical ideas for range-bound trading, which have been tested by me and are quite effective methods. You can use them as a reference.

1. What is a range-bound market? How to distinguish between trends and range-bound markets?

All market movements are composed of two types: range-bound and trends. Trend markets are characterized by a continuous creation of new highs or lows. In an uptrend, prices keep rising, and in a downtrend, prices keep falling.

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Range-bound markets are the opposite. Over a period of time, the market prices do not significantly rise or fall but instead mark time within a price range (sometimes there may be false breakouts, but the market will quickly return to the range-bound area).

Range-bound markets are mainly divided into two categories:

(1) Consolidation patterns within trend markets, where after the consolidation, the market will continue the previous trend.(2) The top-bottom reversal consolidation pattern in a volatile market, after the fluctuation, the market will show a reversal trend.

2. Why engage in volatile trading?

Reason 1: Volatile trading is more in line with human nature and easier to execute.

Many people, when they first start trading, learn trend-based trading strategies. However, they find that the success rate of trend trading is particularly low, with most of the time spent in losses, and a long wait is required for a significant profit.

When facing consecutive stop losses, it's really panic-inducing and uncomfortable, and there's uncertainty about when profits will come; when the market does enter a trend, the anxiety increases, leading to doubts about whether this is a genuine trend or just a false signal, and whether to close the position.

In such situations, one's mentality is severely tested, and it's highly likely that they will close the position early, missing out on significant profits, and ultimately failing to capture the market trend. This is why I say that trend trading is difficult, primarily due to the challenge it poses to one's mindset.

In contrast to trend trading, volatile trading may reduce profits, but it has fewer consecutive errors, shorter holding times, and profits continue to accumulate. The key point is that it poses less of a challenge to one's mindset, allowing for the occasional securing of profits, which soothes our nerves and aligns well with human needs.

Reason 2: Volatile periods are more common in all market movements, so the success rate of volatile trading is higher.

Market conditions alternate between volatility and trends, and we can clearly see on a long-term chart that the time spent in volatile periods far exceeds the time spent in trends. Therefore, using a volatile trading strategy can lead to a higher success rate.

A point to discuss with everyone:The sole purpose of our trading is to make money. Many traders regard trend trading as sacred and disdain other trading strategies, but this is not necessary. We are not in trading to compete with anyone, nor do we necessarily have to prove anything. A simple trading system that is easy to execute and can help us make a profit is a good trading system. We don't engage in a hierarchy of contempt.

Whether it's a white cat or a black cat, if it can catch mice, it's a good cat. Changing our mindset can make trading much simpler.

3 to 4 ideas for range-bound trading

Method 1: High selling and low buying based on the upper resistance and lower support of a consolidation pattern.

According to the definition of trends, in an uptrend, if the market retraces upward without making a new high and then falls back, or in a downtrend, if the market retraces downward without making a new low and then bounces back upward, there is an expectation that the market will enter a range-bound phase.

At this time, we can choose the high and low points of the range-bound support and resistance to carry out high selling and low buying operations.

Subsequently, when the market tests the previous high again and we enter a short position at a high level, the market falls, the order tests the lower support, and after forming a reversal candlestick pattern, we close the position. At the same time, we reverse and go long. After several cycles of long and short positions, the market eventually breaks downward.

Note:

Not all horizontal consolidation structures will strictly follow the highs and lows of support and resistance levels. Sometimes they may not test them, and sometimes they may have a false breakout and then return. Therefore, after the price tests the support and resistance, entering the market after forming a reversal candlestick pattern, or entering a position with a reversal pattern at a smaller scale and then opening a position, and closing the position is more feasible. This can solve some issues of不到位 testing or false breakouts.

Method 2: High selling and low buying based on the upper Bollinger Band.

(Note: The translation is continued from the provided text, and the translation of "Bollinger Bands" is based on the commonly used term in English for this technical analysis tool.)Using Bollinger Bands as a criterion for judging market volatility, when the upper and lower bands of the Bollinger Bands begin to flatten gradually, and the price tests the upper and lower bands without forming new highs or lows, the market trend is judged to be consolidating.

Taking the upper band of the Bollinger Bands as resistance and the lower band as support, combine this with smaller timeframe reversal candlestick patterns or reversal structures to open and close positions.

When the price tests the lower band downward and approaches a horizontal support level, switch to a smaller timeframe and use a "1-hour reversal candlestick" or a "15-minute reversal break structure" to open a position.

When the market tests the upper band in the opposite direction and approaches an upper resistance level, combine this with a 1-hour reversal candlestick or a 15-minute reversal break structure to close the position and reverse, going through multiple cycles until the market breaks out in an upward trend.

Notes:

(1) Enter the market using a smaller timeframe. When the upper and lower bands of the 4-hour Bollinger Bands are flat, the space is not significant. Use a 1-hour or 15-minute pattern to enter, which provides a reasonable risk-reward ratio.

(2) This trading method can be applied to the daily, 4-hour, or 1-hour timeframes. It is not recommended to trade in smaller timeframes because when the Bollinger Bands are flat in smaller timeframes, the space is too limited, leading to an unfavorable trading risk-reward ratio.

Method 3: Moving average crossover, combined with support and resistance levels for buying low and selling high.

Set 4 to 5 moving averages on the chart to form a moving average combination. When the moving averages begin to stick together, it indicates that the market is entering a consolidation phase.

Also, observe the market's high and low points; if the price no longer makes new highs or lows, there is an expectation for a consolidating trend, and at this point, choose to buy low at support levels and sell high at resistance levels.The method of entry can be a reversal candlestick pattern at this level, or a reversal structure at the sub-level. After several cycles of bullish and bearish movements, the market breaks upward.

Notes:

(1) Moving averages should be used with similar parameters, which should not be too large, preferably within 100. In the chart, I used EMA25, 45, 65, and 95.

(2) The MACD energy bars at the bottom of the chart, at the beginning of the consolidation, surround the zero axis with very short bars, which is also a signal that the market is entering a consolidation phase. Subsequently, as the energy bars gradually lengthen, it is a signal that the market is about to end the consolidation and move in a trend. In trading, pay attention to observing and using this in combination.

Method 4: Combine consolidation and trend together in trading.

This plan is prepared for all friends who have a fixation on trends. The market always cycles and alternates between consolidation and trend. After making several consecutive profitable trades in a consolidating market, the likelihood of the market moving in a trend increases.

At this time, when closing a position, leave half of the position open. If the market moves in a trend, add to the position after breaking through the consolidation range and hold the trend. Since there is a base position, adding to the position after the trend is established gives the trader a psychological advantage, making it easier to hold onto the big trend.

Only close half of the position and reverse at the resistance level above. After the market breaks through, stop the reversed order and continue to hold the half position of the long orders at the lower level, while adding to the position.

Notes:

(1) This trading method combines consolidation and trend, and the trading thought process involves a significant leap, requiring a relatively rich trading experience to execute.(2) Due to the unpredictability of market conditions, sometimes keeping half of the position may result in a loss of half of the profit if the market does not break through and reverses. In practice, one should have expectations.

(3) The gradual enlargement of the MACD energy column is a signal that the market is about to trend.

These are the explanations for the four methods of swing trading. Since the holding time for positions in a swing market is relatively short, it is a short-term, or even intraday, trading strategy. Before engaging in actual trading, everyone must first review past trades and become proficient in operations before entering the live market.