Range Trading In The Futures Market

Range Trading In The Futures Market

To be able to buy a futures contract and hold it for a long term it is important that one looks for a strong trend before entering the market. When trading there may be many instances when one may not find any trend at all. In fact, most of the time the trader may not be able to spot a dominant trend. It is at these times that you should look to do range trading in the market. Range trading lets one capitalize on the movements in price even when there is no significant trend in the market. Read here the full report.

 

To be able to take positions even when there is no trend will give one lot of flexibility and be able to participate in the market, no matter what the market is doing. When the market is not trending then it is a sideways market and this is where the trader makes use of the price range to trade.

Trading the sideways market

An uptrend is formed when there is a series of higher lows and higher highs and a downtrend is formed when one sees lower highs and lower lows. When none of these can be seen in the market then this means that is no direction and it is a period of indecision. The sideways market movement could happen because of a slowdown in the dynamics of demand and supply in the commodity market or if the quarterly earnings are flat in the stock market. In the currency futures pace if the bank keeps the interest rate the same then this could cause the market to stay flat.

There could be many other scenarios why it may not be possible to take a stance on the market. When their is a scenario of this type in the market then this will let the trader take a long trade in the futures market. This denotes market is in an indecision period. However, when the market is trading sideways this should in no way stop the traders from taking short-term positions in the market.

Advantages of range trading

There are some reasons why future traders prefer to do range trading when a clear trend is not present. The range lets one identify the entry, stop loss and the profits prices easily. When trading in a range the stop loss needs to be placed outside the range and the profit target is inside the trading range.

 

 

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