Lesson 4: Ranges
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Dear Lex & Crypto community,
Here is the Fourth Lesson of the Series. We start with 1st Lesson in Section 1 — Supply and Demand.
Note: To Refer Index/Content of the course go to — Index Page
Sit back and hold tight! HAPPY TRADING!!
Note: Before starting Lesson 4 make sure you’re familiar with previous lessons since I use terminology from those.
What is a ranging market
Market structure is key as I have described in lesson 2. When you have a trending market in one direction you consistently have a series of higher lows/higher highs and or lower lows/lower highs.
Ranging markets proceeds a trending market. Rather than making a new high and a new low, the basis of the market is that it finds support at a common low and resistance at a common high.
The market trends then it ranges. The orderflow of this can be consolidation before continuation, reversal, accumulation, distribution etc. It all falls under the same trading conditions and that is that the market is ranging before directional trend.
In a trending market its common to trade the trend in terms of waiting for pull backs anticipating a similar direction. In a ranging market you will have a top and a bottom, bouncing back and forth.
Ranges, Deviations and MSB+ Ranges + Setups
Ranges : Period in the market of consolidation, accumulation, distribution etc. (Orderflow)
Ranges + EQ: identifying range direction using mid range
Deviations: Trades below/above set range (false break) before ultimately trading back in mean range.
Ranges using Market structure break/deviations and how to set up: My personal way of playing ranges with supply/demand levels.
Ranges
As mentioned above the market will come off a trend and “relax”. At this point you’ll have key swing points that form. There is no right way how you personally identify a key range and as the range goes on you must keep looking for swing points that are confluent with set range.
Ideally you can take the first low that forms off a down trending market followed by the high and the first high that forms from an uptrending market followed by the first low.
After the market comes to a period of consolidation following a downtrend/uptrend it will usually be followed by an immediate swing low/high. These swing points will be your range high and range low. The market ideally will trend between these key points using them as support and resistance and as forms of liquidity in the market.
The .5 Is the EQ short for equibruim and the mid part of a set range. Trading above the EQ usually signals a bullish trend and is attracted to the range high. Trading below EQ is usually considered bearish and is attracted to the range low. It is the fair value price of mean range.
Using your fib retracement tool mark out as i have.
Price forms a swing high followed by a swing low.
Price trades between set ranges before revisiting each area of the set ranging and sweeping both ends.
Range Example
Price comes off a uptrend and forms a swing low followed by a swing high. Again how to define your ranges is all personal preference. I tend to always flip back and forth to what gives the highest confluence.
1. Market comes off set trend and consolidates before further direction
2. Swing Low is formed following the uptrend
3. Swing High is formed following the swing low mark.
4. Swing Low is swept (liquidity engineered): After the market raids one side of the range it is likely it will raid the second part of the range.
5. Swing High is swept (liquidity engineered) following the swept range low we then come to the opposite side of the range.
Ranges with EQ
The EQ (equilibrium) is the mid range of a set range. It is considered the fair value in the mean range. Above EQ we are “bullish” and more likely to tag range high and below EQ we are “bearish” and more likely to tag range low. The EQ is a strong pivot in price and often gives good support/resistance.
Range EQ Example
1. Market comes off set trend and consolidates before further direction
2. Swing Low is formed following the downtrend
3. Swing High is formed following the swing low mark.
4 Price unable to hold EQ and ultimately comes back to range low. Once EQ breaks we have a strong uptrend to range high.
Range EQ Example
1. Swing High is formed following the downtrend
2. Swing Low is formed following the swing low mark.
3. Swing Low Ran following range identification
4 Price unable to break EQ and ultimately suppressed below it
5. EQ Break which shifts price to the upper part of the range which indicates range high next
6. Swing high swept following range low sweep and EQ break
Range Deviations
Range deviations “false breakout” is when price directs away from mean range before ultimately breaking back into it. In most cases range deviations are an extremely good sign that price will revisit the opposing side of the range upon breaking back in.
2 different examples below
1. Swing Low is formed following the downtrend
2. Swing High is formed following the swing low mark.
3. Swing Low Ran following range identification
4. Price deviates below key swing low/range low before breaking back into range
5. Swing high is ran following range deviation reclaim
Ranges using Market structure break/deviations and how to set up:
This is how I personally trade set ranges using market structure breaks and formed demand/supply levels.
Using the examples above:
Following the price deviation and break back into the set range we identify any formed demand/supply levels following market structure break.
H12 Breaker (demand) formed following MSB.
Price comes into it before ultimately going for range high. Entry would be at top of breaker (demand) with a stop slightly below range low.
Previous Trade Example via ranges
1. Deviation confirmed once we break back inside range.
2. Supply forms following the market structure break and shift.
3. Price sweep into M30 Supply following MS Shift and MSB
4. Entry identified following the sweep and price unable to shift in a new high. Stop loss placement above the swept high. If price is trending we should not revisit the same high twice in this scenario. Target would be range low
5. 0 drawdown for the most part. Deviations + MSB + formed supply/demand levels are usually a nice setup.
Happy Trading,
Lex & Crypto
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