Range-bound Day

These are hard days to trade. People (novice traders) get slaughtered on days like this. A Range-bound day is simple, where the high and low of the day are well defined and the market trade between the two. There is no trend in the near term moving averages or VWAP. In other words they are flat. There are a few things you can do on a range bound day:

1. Do nothing. Do not trade at all.
2. If you must trade or inclined to trade. Define the high and the low of the day from the pre-market high and low.
3. Then use any oscillator and trade overbought - oversold levels.

Trading a Range-bound day

I didn't want to do #1 :) Well for me if I don't practice I loose touch, so I must practice. I did two trades today, both on the short side. Again this just shows my bias. I could as well have traded two longs, likely would have made the same results:

In the image above, as I was setting up to do some trade, I plotted the pre-market high and the low 3565 and 3518 respectively for the S&P 500 Index. That is a 47 point range. I said to myself, I can work with that... not too bad. I can potentially get 10 points there somewhere. The blue VWAP line is dead flat, gave me confidence.

The Magenta Box is the US market time and the range. Market is still trading so, I don't know if the range is final or not, but this is what I am working with.

Notice, market actually broke the lower range by a little, but quickly reversed. That reversal was the best trading opportunity of the day. That I missed!!

Well I don't always find the best opportunity! That is a fact. You live with it. In additional I currently have the bias towards the short side. So I let the market rally and high of the day. That happened around 11:20 am. Market was overbought on the stochastic below. I saw, but still didn't do anything. I thought it can break the upper range! It 12 noon market tried again and failed. As it went below VWAP, I shorted @ 3540 with the 10 point target and 5 point stop. I got a fill within a few min. I did the same on /NQ as well, got same result.

Its not much. But every little bit adds up :)

Disclaimer: This is NOT professional advice, this is all just my own opinion and experience. I am NOT a Certified Financial Adviser. Consult professionals for any financial, accounting or legal related questions you have.

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