Trading in the Range
(A little reminder before you start reading: The graphics look blurry due to the size of my monitor. Please right-click on the images and open the image in a new tab to see clear.)
In order to trade in the range, we first need to learn when the range formation occurs. If you are looking for trade setups in the 4h and 1h time frame, you will see that the price usually ranges when it comes to daily and weekly resistance and support levels. In fact, it is very easy to determine support and resistance levels in higher time frame charts, but most people miss their trades because they do not know what to do when the price approaches the levels they set. There are 2 states of the price movement form. It is divided into two as range / horizontal movement and expansion / rapid rise and fall. In general, the market starts to range after an upward expansion movement. This range movement is called distribution or re-accumulation. And after the new range is completed, it moves to the next area of interest with the expansion movement to exit this range. After the same events, there is an expansion in the downward direction, the price ranges again and this is called accumulation or re-distribution. The accumulation and distribution ranges are very similar. In the accumulation zone, the sudden decrease ends and the goods in the hands of people who think that they will fall more are collected, while the whales increase the number of goods in their hands for the great reverse movement, people get bored in this range movement and sell the goods in their hands. After the whales collect enough goods or trap enough short positions, they suddenly break the accumulation range up and achieve the reversal movement. After the accumulation breakdown, the price cannot rise continuously, so by making the price re-accumulation range in some interest/resistance regions, it makes people think that this upward movement is over, and people think that this movement is distribution and start to short it. When the market sees that there are enough short positions opened, the re-accumulation range breaks up and continues to rise by trapping more short positions. The opposite of these events occurs by trapping long positions in the distribution and re-distribution movement.
In general, we do not know how many redistribution and re-accumulation zones there will be, but according to human psychology, it usually happens twice. this formation itself is a complete cycle and the market usually moves forward by making these movements in all time intervals, even if you do not see it. In addition, while these movements are the same in every range you see above, the same movements occur in a smaller time frame in that movement. In short, in a redistribution range formation that you see on the weekly chart, it can be the same cycle on the daily or 4h chart. The formations called double top, double bottom or shoulder head and shoulder formations are usually just range movements, but they have occurred in such a way that people have given names to these images. but in general, everything that you will examine later is actually a range movement and works in different ways.
In general, we can associate this cycle with wyckoff scenarios. The reason for these cycles is that after the over-sold (ie expansion movement) occurs, there is a decrease in the sellers and the market comes to equilibrium with the market meeting these decreasing sales, and then it continues with the sudden upward movement. As we move away from the oversold zone and approach the overbought zone in rsi and other indicators, the buying decreases and the decreasing sales are balanced by the market and the correction of this rise comes or a deeper decline occurs, we will explain it in the trend pdf.
Wyckoff Formations
He had important studies on Wyckoff range formations. I think it will help you to trade within the range to have a general command of these formations and to know what the zones mean. I used the following information from another source. In general, everyone is familiar with these scenarios, but you will not see the exact same scenarios in live trading. But still, I think it would be good to know them. The important thing is to find different ideas to support your bias and the result that will come when you combine these ideas with the best execution. As a result, I always have the following sages in the back of my mind, but I always give importance to liquidity and market structure breaks when buying trades.
We can say that all range formations generally resemble these 4 graphs. For example, if we consider the accumulation range formation, the market maker buys against the sales when the price is in the oversold area, and the range low level, where the most sales and volume are formed, is created in this way. Then, when the sales are over and even the slightest purchase causes the market to make a dead cat bounce, the range high level is formed. After such a fast expansion movement, it is quite natural and necessary for the price to make a range in this area. Do you need to understand whether this is accumulation or redistribution? How can I trade within this range? How can I use these movements to my advantage?
Now that we understand the logic of range formations, how do we determine the range? How to determine the correct range? First of all, you wait for the price to rise and fall suddenly for a range to form, and the place where this movement ends is usually the level that creates the most volume, and you set this level as range high/range low. With the stabilization and decrease of the sales after the sudden decrease in the price, even the smallest purchase makes high jumps and these jumps are usually volume less. where this movement ends, it determines your range high/range low. Usually buying new trades after an expansion is just a gamble. Therefore, it is the right move to wait for the range high and low formation and then act.
First of all, everyone can ask how to determine the range high level after setting the range low at the end of the expansion. I usually wait for the price to come to the mid-range area and get a reaction after it has the potential to form a range high. If it reacts, then the range you have determined is correct. However, if the price does not get a reaction from the mid-range and goes to make a new low, then a range will not form in this area. This is a feature that really needs to be taken care of because, as far as I see, people draw ranges according to their own heads for every price movement, but the price needs to respect the mid-range level for us to call it a range. Therefore, after the bounce is over, wait patiently for the price to come to the mid-range level and watch the price. If it gets a reaction from there, we can say that the range formation has started.
As can be seen below, the reason why the price increases in volume at the end of the expansion movement (2) and the range high when the volume is at the highest level is because now the buyers are well prepared and this allows the market maker to make sales easily. but now, as the buyers are exhausted, the volume starts to decrease and the market drags downwards even at the slightest sale because the buyers are now quite low. Afterwards, a potential range low occurs in the (1) region, but we wait for the price to test the mid-range to be sure of this yet. As you can see, after the range low, the price received a reaction from the mid-range region and this proves the accuracy of the range high and range low levels we have drawn. We learned how to set range successfully. Afterwards, we will learn how to take a trade position in the range and in the range deviations, but let’s give one more example.
I think that many examples will be enough for you to determine the range high and range low. We have learned how to set a range so far, now we are learning how to trade within the range. It is very important that you first determine the range high and range low, and then determine the mid-range. The range high and mid-range region are the regions where we will look for sales and the region between the mid-range and range low are the regions, we will look for buying. Unless it’s a very perfect setup, it’s pretty risky to look at the reception side when close to range high, and I’d avoid it. I generally tend to buy under the range low and sell towards the range high. These are the setups that give the most risk-free and best RR, but still, different trades can be taken under some conditions. but if you want to trade the setups with the most conviction and the most RR, just watch the price as long as it doesn’t approach the range high and range low.
We set the range. We learned in which regions and in which direction we will look for trade setups. now we will learn the most important execution. Everyone can do technical analysis, everyone can draw support and resistance, but most people do not know how to implement their plans or cannot plan. when the price comes to the area of interest, he gets around. If these happen to you, it’s because you haven’t back tested your trade setups before. Before buying a real trade, I recommend you to test the range studies you have learned on the demo account or by just watching the price without trading. Determining the correct range was the most important task. After determining the correct range, we will learn how to use the range.
Before execution, I think we need to talk a little bit about liquidity here. When entering a trade, first of all, you need to know very well where you went wrong and what your target is, why you set this target. If there is no reason/target that will attract the price like a magnet in the range, it is meaningless to trade just because there are execution reasons. simply, the price may go above the range high level and return to the range again, we call it deviation movement. If you buy short just because such a move happened, you are wrong. There was a deviation, but is there any liquidity that attracts the price near the range low? Where will the market maker explode the stops of the people it traps with the break of the range high? What are the regions of liquidity? What does liquidity mean?
Liquidity
Liquidity is always staying above old highs and below old lows in trading refers to the presence of a significant amount of buy or sell orders at the levels where previous price highs or lows were reached. When the price approaches a previous high or low, traders often anticipate a potential breakout or reversal. These levels are significant because they represent areas where the price has previously struggled to move beyond or where it has previously found support or resistance. If there is liquidity above an old high, it means there are a large number of sell orders at that level. This can act as resistance, preventing the price from moving higher. Conversely, if there is liquidity below an old low, it means there are a large number of buy orders at that level. This can act as support, preventing the price from moving lower.
Traders often look for liquidity above old highs or old lows to make trading decisions. If there is a significant amount of liquidity at these levels, it can provide an opportunity for traders to enter or exit positions. For example, if the price is approaching an old high and there is a large amount of liquidity above that level, a trader may decide to sell their position to take advantage of the potential resistance and prevent a potential loss. On the other hand, if the price is approaching an old low and there is liquidity below that level, a trader may decide to buy in anticipation of a potential rebound.
In short, liquidity happens on old bottoms and tops. because some people’s stops and some people’s breakout orders are here. the greatest liquidity occurs at equal peaks and troughs. If the price has made a low at a level and jumped very close to this low without going below this low again, the market maker traps people and allows more people to stop at that level and more liquidity occurs. That is, the more a price tests a level, the more likely that level will be broken quickly. Generally, there is a large liquidity in the highs and bottoms that occur in the swing high, that is, the higher time frame, because banks usually trade on daily and weekly charts, and old highs and old lows on the daily and weekly chart are usually more important for the market maker because they fill their orders by taking advantage of the banks’ stops.
With the above example, I will try to explain how equal lows and highs are magnets for price. As I explained, with the formation of equal bottoms and equal tops, more people’s stops accumulate in that region because people think that this level is support and draw a support line, and when this support is broken, they think they should stop. Thanks to these two different communities, liquidity is created for the market maker and benefits from it. After determining the range, determining the liquidity equal high/equal lows or swing high/low levels within the range and around the range high/low is important to understand where the price will go. As you can see, 4 equal lows are just below the mid-range region. If you remember, I said that we should look long in the region between mid-range and range low. Both this conviction and the existence of equal lows tell us that the price may move towards the range high region after this liquidity is taken, so it would be best to look for a long position under equal lows or wait for a bullish structure in a lower time frame after obtaining equal lows and then look for a long position. As you can see, the deviation that occurs under the price equal lows (it is the name given to the price going above or below a significant level and returning back into this level after clearing the liquidity. It is also known as fake breakout. Because after a significant level is broken, unless this level is reclaimed again, this is the price point. It is resistance. If it reclaims in the opposite direction, this is known as a bull or bear trap.) It worked as a bear trap, and after a while after this level was broken, the price went above the range high level, exploding both the long stops and trapping the shorts. This event is also called fake breakout. fake breakout is more powerful than regular breakouts. I will explain this in another pdf. After the fake breakout (deviation), see how the price reclaims the mid-range level and expands, taking equal highs near the range high and liquidity above the range high.
But you can ask when price sweep the equal lows below the mid-range it didn’t run the range low level but when it run the equal highs it also run the range high level. You can ask me while it cleared the range high level, why didn’t range low do the same? Wasn’t there liquidity there too, could he have cleaned it while he had come this far?
You need to use some tools in this circuit, this range may be redistribution, this range may also have more liquidity at the high level because after a long decline, it made a range here and because people thought that this decline would continue and started shorting early, they may have put their stops above the range high level. Make your plans, but whenever something goes against your plans, you need to be open-minded and change your plan. If the price couldn’t reclaim that level after clearing the equal lows below the mid-range, it could move up to the range low level, but if it reclaims it, you’ll close your shorts and make a mistake.
So, let’s try to answer your question. I told you to set the liquidity levels after you set the range. we usually said that these levels are equal highs and lows, but if we consider that bankers trade by looking at weekly and daily charts, the highs and lows of daily and weekly candles can create more liquidity. If you look at the daily and weekly chart within this range, you will see that the candles at the range high level do not have wicks on both the daily and weekly charts. Normally we would like to have both an upper and a lower wick in an organic candlestick chart because usually after this previous candle closes, people/bots try to manipulate and close their positions, but as you can see here, with the daily candle closing, the shorting bots started to fall suddenly without stopping and this was the case. commonly known as candle fake out. I will explain in more detail, but what you need to know is that all candles are wicks in the weekly and daily. In addition, we can’t even see the equal highs we set in the weekly time frame, so the weekly high is more important and it is necessary to clear the range high level of this price and make a deviation and move up to the range low.
As a result, the old daily/weekly peaks and troughs are swing points for us, and contain more liquidity than the liquidity in 1-hour and 4-hour charts. Additionally, after taking into account the range high liquidity, you can see how cleanly the price dropped to the range low with a deviation. After learning about liquidity logic, I will address how to execute with these deviations. However, I believe that we need to determine our targets in our trade plan before executing. Even if you find a very clean execution play, it will be meaningless without a target.
Now let’s look at the liquidity levels and deviations in the distribution range here. yet we are still interested in the reasons for execution we will talk about how to get execution in the next step.
As you can see, after the upward expansion movement, the price starts to decrease with the highest volume at (1) level and then the decreasing volume. here we set our range high level. Afterwards, the first jump movement takes place from 59500 levels. Here we have determined the potential range low. Then we will wait for the price to come to the mid-range regions and get a reaction from these. If you look at the region number (2), the price gets reactions from here and our potential range low level is now range low. also, if you look at the reactions it gets from this mid-range, they create an equal high on the mid-range. Remember, we will look at selling between the range high and mid-range region, and buying between the range low and mid-range. You can see that the price is coming back to the range low level with an increasing volume from the (2) region. This informs us that there is a market that supports these sales. but if you see the jump from the range low region to the mid-range, it happens with a decreasing movement. (4) The reason for determining the region is that sometimes the equal lows may not be at completely equal levels, and sometimes liquidity pools can be formed in this way. The price range comes to the low level and clears the bottoms created by this (4). What you need to do here is to be patient yes, as a plan, our equal highs above the range high and mid-range are the target, but entering the trade without confirmation increases the risk. So, we need to see price respect our range. As you can see, after creating price deviation, it quickly creates a fake breakout and moves upwards. Afterwards, it retests the range low level (5) and confirms this deviation. We will refer to this again in the execution section. Thanks to this confirmation, the best RR trade in the range has been formed because the liquidity in the range low has been cleared, the deviation has been created, there are liquidity pools at the mid-range and range high levels, all of which are sufficient reasons to trade long.
(3). You may ask why the price is testing the range low again after the region? because now they need liquidity because they are doing the distribution range and they want more people to buy early short and put their stops at range high. We also have to forget where the price comes from. Considering that we are in the overbought region on a weekly and daily basis and we have experienced a large increase, we need to understand that this region is more distribution than re-accumulation. So, by testing range low, they get more people to create liquidity and fill sales orders. By descending to the (8) region, they clear the equal low liquidity in the Fibonacci 61.8 region and fill the sell orders themselves as they burst all the shorts’ stops with a sudden expansion move. Afterwards, a very clean distribution range formation is formed with the deviation (7) (UTAD) movement on the range high. You can see how much liquidity is generated from the volume above the range high level.
In distribution movements, first the range low liquidity and then the range high liquidity are taken. In some rare cases it may be the other way around, but they are a redistribution movement. If you mostly think that the price has now reached the overbought zone (rsi) on the weekly chart, having a bias towards the distribution will often make you play these ranges more easily. If it is re-accumulation (if it has reached resistance and oversold in the higher time frame, the probability of re-accumulation is very low) you can wait for the new range movement with the most stop or wait for the price to make a new deviation and enter the range again. There is no rule that any method will work 100%, but it is very important to know when you are wrong.
First of all, this movement will definitely be deviation in the range high or range low breakdown, so if you enter the transaction from the cheaper price to the long / the more expensive price, you will be wrong. You will take more risks. What will your stop be when entering this transaction? so you should always wait for the price to re-enter fake breakout/range or get confirmation. After deviation in the (7) region, the price suddenly sells because if you see the volume, you will see that now the buyers are exhausted and the market maker can move the market down even with a small sale. The region numbered (9) is a movement that confirms the deviation movement, just like the regions numbered (5) and (8) and it comes to the optimum entry (fib 61.8–78.6) level. I will explain them in the execution section. Since there is no liquidity zone left in the range after the approval movement and the distribution movement is completed, the price comes out of this range with the expansion move below the range low level.
I think everyone will do this range drawing at first glance, but remember that you start drawing ranges from the moment the expansion moves. It takes days for you to see this whole picture, so I follow the rules.
- Expansion happened lets mark our range high level and wait for any bounce to mid range or above mid range to confirm our potential range low
2. Price bounced significantly so mark our potential range low and we can see price moved more than mid-range and Let’s watch if price gets a reaction from the mid-range level.
You can see price react our level and left equal highs above the mid-range around range high. Then tested the range low level again and increased the liquidity in that area.
After clearing the equal lows under the range low, making deviations and trapping the short positions, we focus on our targets within the range. Let’s not forget that there are equal highs above the mid-range and poor highs with arithmetically decreasing, also that there is range high liquidity. So entering long after deviation and putting the stop under deviation will be the best RR trade setup in the range. After the equal and poor high liquidities are taken, the price also retreats significantly, because with this breakdown, too many people go long and most people’s stops explode and the market maker can pull the price down.
After the pullback is complete, the price reclaims the mid-range, leaving equal highs at the range high level as consolidate over the old equal highs. Then, with the sudden rise and deviation movement, range high and new equal high liquidity are taken. Then you can see how the broken range high turns into support by going down to the lower time frame. but since we are in the overbought zone on a weekly basis, the price makes a fake breakout movement and deviates above the range high, and by confirming this fake breakout, it decreases rapidly. The fact that it sells so fast emphasizes that this range movement is distribution. Then it comes to the deviation below the range low and makes equal low there and then cleans this equal low with the jump of the dead cat and separates it from this range and trade ends in this range with 2 clean deviations.
The mistake made is to continue the trade by holding onto this range. You can do this, but I am in favor of drawing a new range after the expansion movement has occurred because the liquidity to be taken has been taken. Now, new liquidity pools and ranges will be formed.
We can’t accept it completely wrong, the price still respects the range, but the trade RRs to be made will be higher with the new range drawing. Of course, you can continue like this. The range is not over unless the price leaves the range, but it is bad to keep the same range after all the liquidity to be taken and after the expansion movement.
If you look at the trade RRs taken with deviations in the new range, you will see that there is a higher and closer invalidation level. What is different here is that the price makes deviation on the range high 2 times. The main reason for this is to make deviations on the range high, as I told you, it does not mean that you should definitely enter short. After the first deviation, there is no liquidity in the range except range low. Therefore, I do not recommend you to buy every trade to be more convinced. Before trading, our liquidity targets must be established. You can see the poor low formation with the 2. deviation, and thus, liquidity has become our target. When we have a target, we enter the deviation movement with the confirmation/retest movement and enter the short process and process with the poor low and range low target. The same things I said are true in the accumulation range, and vice versa. So I don’t think you need to explain it all over again. We learned to draw range, we learned liquidity pools, we learned that equal highs or swing high/ low in range or near range high/low will also increase liquidity. We’ve learned that it’s dangerous for us to trade unless we have liquidity goals. now it’s time to learn how to execute. I think most people could easily understand and implement it up to this point, but the execution part is where 70% of people screw up and get scared. because everyone plans and talks, but getting into the trade causes excitement and stress because he hasn’t back test that plan before.
I think that giving so many examples help you to understand the range drawing, deviations and determination of liquidity, I think you learned when you should trade, even if you get a confirmation trade without setting a target, it will be risky to trade.
Execution
We have come to determine the most important point, execution. After placing the previous steps on the chart, all you have to do is the price goes above the range high or range low. but you should keep in mind that if the price is in the overbought region in the higher time frame, there should be a certain target/reason (liquidity) between the mid-range and the range high when taking long with the deviations formed in the range low part. If there is deviation, entering long with the target range high yes is a logical reason, but I prefer to have more reasons. When we look at this example, the price makes equal highs above the mid-range and there is a sudden rise after the deviation. never try to trade with breakdowns. always wait for the price to test the breakout.
As here, after the price is consolidated for a while, it tests the range low and deviation breakdown, and this test is the most suitable area to enter the long. If the price goes below the old deviation zone, I suggest you accept that you are wrong and wait for my next transaction. The region with the retest range low here also reaches the Fibonacci 78.6–61.8 region. Fibonacci retracement levels, which we call the optimal trade entry, should always support the levels you want to trade. because the price is moving up from a certain level and these expansion moves usually go as low as Fibonacci 61.8 and 78.6 to get confirmation. If the market maker wants to increase the price rapidly, it does not delay the price under fib 0.5 and continues on its way by taking a quick retest. This is how he fills his remaining orders. If we are looking for sales between the range high and mid-range while determining the same range, and if we are looking for buying between the mid-range and the range low, the same logic works when using Fibonacci. After placing the Fibonacci tool after the price’s expansion move, wait for the minimum 0.5 level to see 61.8 and 78.6 levels at best. these levels will be cheap levels and there will be quick reactions if the market maker wants to raise the price. If the price is below 78.6 for a long time, this bounce is just a dead bounce and the market maker is trapping you, so you should watch the price live and trade. You should enter the transaction with an instant market order, not a limit order. In this example, we made the range determination on the 4h graph, but always go down to lower time frame intervals when executing. I find 1h and 30m reasonable. The market structure break tactic was not applied in the execution in this example, but both the price regression to Fibonacci 78.6–61.8 and the perfect retest to the range low level can be considered sufficient reasons. Not all conditions are always met, which increases the risk range of the trade.
This time execution is related to the acquisition of equal lows that occur near the range low. As you can see, the price broke the market structure by taking equal highs and then left poor highs and regressed to buy the equal lows it left behind. After the liquidity was cleared, this level also coincided with the Fibonacci 78.6 level. We can call it a magnificent introduction. and also, the quick response informs us to remain confident in this trade.
Another important point in execution is that if you are right in your action, you want a fast reaction. If the price does not move from the level you entered, you are not right because the market maker does not allow the price to stay so cheap within the range, it quickly takes the price up in the opposite direction. As you can see here, after the retest movement, the price goes up rapidly and a market structure break occurs in the first region (1) at the lower time frame. then the price makes a new higher low and reaches its equal high liquidity. What you need to understand here is to follow the price after entering the process and see that it produces a bullish structure in a lower time frame. Be realistic, don’t deceive yourself because you’re in the long position, and don’t produce biases that won’t support your bias. You see the same phenomenon in (2) region. After the market structure break, it goes to buy his range high liquidity.
If we look at the example here, the price jumps when it first tests the range high while deviation and turns the range high level into support. Afterwards, the market structure is broken by breaking down the red old low. After such a rapid decline, gaps are formed in the price, I will explain this later, but in general, the gray region is the neck region of the deviation structure and the refraction region. There are also those who call it supply. When the price is added to the Fibonacci decrease from the top, we can say that the test made to this neck region quickly rejects the Fibonacci between 0.5 and 61.8 and this region is actually the confirmation of the deviation. In addition, the gray area, which we call this exact neck region, includes the liquidity region, which we have determined as poor highs or equal highs. So rejection from this region will be execution for our short bias. The top of the deviation region should be considered as a hard stop and the consolidation movement above the range high should be considered as a soft stop.
Another example is execution. Again, the rejection of the price returning from the Fibonacci 61.8–78.6 to fill the gap formed due to the rapid decline after the deviation and also to get approval for the deviation neck region is a great execution example for our short bias.
Using Moving Averages for Execution
This time I will talk about a unique execution where I combine range and moving averages. It does not correspond to much, but we can briefly summarize it as follows. If there are liquidity pools on the mid-range and the price has deviated at the range low level, moving averages can help. As you can see, the price is both deviating under the range low and deviating under the moving average. this will add extra confidence to your bias because you will have longed the stops of the bots and people who shortened the ema200 because the ema200 is broken and these people will be trapped in these positions. You can use moving averages in this way to support your bias. I do not buy from support, that is, I do not buy because the price comes to ema200, but if the price goes below ema200 and then rises above it again, if ema200 is an important indicator for the price (each ace has its own moving averages, but in general ema50 and ema200 are sufficient, if they are If it doesn’t respect, I recommend you to use ema21 and ema8 as well) and since this ema200 is broken below, many people will stop their positions when they enter a short position, while many people take from ema200 and go under it. this is an extra source of liquidity for us. Combining this with range liquidity theory is truly enormous. As you can see, you can have a new execution with the combination of ema200 fake breakout and range low fake breakout.
The deviation movement in the second region is the same as the previous one. The price makes a deviation above the range high, then it comes to the neck region, which is the retest region, to confirm this deviation (gray area) and goes to the target as reject.
Also, another point that will give you confidence is the hybrid indicator that I am currently using. I only use the ema50–200 indicator of this indicator, which shows the sales and purchases and colors the candles. Red candles are high volume candles that show that people are oversold and that the market maker is buying to balance these sales, while the green ones are high volume candles that show that people are overbuying and that the market maker is selling to balance these purchases. The formation of red candles in the potential deviation area under the range low is a good thing as you can understand, because we want to trap people by making sales here. In the same way, the increase in the purchase of people on the range high comes to our business, in the same way, we want to trap those people in deviation. so if you see these colored candles in the deviation movements, you can say that this movement is deviation and a lot of people are trapped.
That’s all I have to say about ‘trading in the range’ for now. We have covered some topics superficially, but later on, I will talk about those issues in detail. I think I have touched on a lot of things in general and detailed terms.
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