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Trading With Sideways Price Action Area

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135 views7 pages

Trading With Sideways Price Action Area

Uploaded by

jay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Trading with Sideways Price Action Area

dotnettutorials.net/lesson/trading-with-sideways-price-action-area

Back to: Trading with Smart Money

In this article, I will discuss the two approaches to Trading with a Sideways Price Action
Area in detail. Please read our previous article, in which we discussed the Pin Bar
Trading Strategy. As part of this article, we will discuss the following pointers.

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1. Two approaches to trading with a sideways price action area
2. How enter?
3. How to exit?
4. Odd enhancer

How Do We Trade with SIDEWAYS Price Action Area Break Out?

A minimum of three candles are required for a sideways price action area break out.

Here are two approaches to trading the breakout designed to minimize risk:

1. Buy the initial breakout when the conditions are right


2. Buy the retracement to the breakout when you need confirmation

Break Out Condition

Now that you know TWO tactical approaches to trade the breakout, let’s look at how to
recognize which OR breakouts are the best to trade. Again, I’ve created a quick checklist
for evaluating a stock’s price and volume action. Remember, these criteria are used to
find stocks likely to lead to a successful breakout and to define good risk points based on
the stock’s price and volume action.

For bullish breakouts. look for a price to hug the top-of-the-range


The quicker you enter a range breakout trade, the better.
Trade with the trend. In a bear market, downward breakouts tend to make more
money than upward breakouts in intraday trading. In bull markets, upward
breakouts make more money.
For upward breakouts, trade only those situations where the price most often closes
above the middle of the opening range. Downward breakouts from the opening
range do best when the price often resides below the range’s midpoint.
There is no resistance above breakout of the bullish breakout
Break out with volume
After the breakout, the stock exhibited bullish price action for the up breakout.

Trade set up 1: For Opening Sideways Price Action Breakout


Logic: 1st candle of the day should be a heavy volume

Why heavy volume on the first candle of the day?

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We are trying to identify the SM sentiment for the day. If Smart Money wants to buy stock,
we would see that on the open with heavy volume and a strong directional move. The
stock may gape at the opening, which shows that it may trend up the rest of the day.

Open = low of the first candle indicates SM is strongly bullish

1st candle having a lower wick indicates the price tray to move down, but Smart Money
enters to drive the price higher

1st 5-minute candle should be a wide range candle with a low wick or no wick with
volume
Stock in an uptrend with price above new demand
The next candle/candles should be inside candle be a doji or a shooting star or
narrow-range candle with less volume
The range stays within the top 2/3rd of 1st candle

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Odd Enhancer

Avoid if

Price extended from 20ma on entry time frame ( I am using 5 minutes)


Sideways pa area volume is almost equal or more relative to the first candle
Entry time frame not trading just above demand or supply on a higher time frame
Less than a 3 to 1 reward-to-risk ratio to target on the chart

3 action steps:
➡ Buy 1-2 cents above the second candle, preferably a Doji or shooting star if playing
long. The opposite of playing short.

➡ Upon entering your place, stop loss 2 cents below 1st candle or low of the last swing
low

➡ Target is 2R

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Trade set up 2: Pull back Break Out

SEE THE PULLBACK FOR CONFIRMATION

SMART MONEY ALWAYS BUYS FROM VWAP OR AROUND VWAP IF THEY WANT TO
BUY

See the pullback to VWAP OR 20 EMA. If the price pullback to VWAP EMA but is unable
to push and hold below VWAP, indicating that the buyer’s strength

Pullback condition
1. Low volume
2. Lower wick
3. NARROW RANGE CANDLE

ODD ENHANCER
Avoid if

Already traded to target on a bigger time frame


Sideways pa area volume is equal or more relative to the first candle.
Less than a 2 to 1 reward-to-risk ratio to target on the chart

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Let’s do an example
Big picture

ON A DAILY TIME FRAME

On a daily the uptrend

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HIGHER TIME FRAME ANALYSIS

ON 30MINUES OR HOURLY TIME FRAME

TRADING TIME FRAME

I am using entry-exit for a 5-minute time frame

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Sideways markets can offer numerous trading opportunities due to the predictability of
price bouncing between support and resistance. However, it’s important to recognize that
ranges don’t last forever, and the market can break out in either direction. Hence, staying
nimble and having clear rules for managing such transitions is critical. Always be aware of
market news and events that can cause a range to end and a new trend to begin.

In the next article, I will discuss the Pullback Trading Strategy in detail. In this article, I
explain the two approaches to Trading with Sideways Price Action Area in detail. I
hope you enjoy this article.

Dot Net Tutorials


About the Author: Pranaya Rout

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Pranaya Rout has published more than 3,000 articles in his 11-year career. Pranaya Rout
has very good experience with Microsoft Technologies, Including C#, VB, ASP.NET MVC,
ASP.NET Web API, EF, EF Core, ADO.NET, LINQ, SQL Server, MYSQL, Oracle,
ASP.NET Core, Cloud Computing, Microservices, Design Patterns and still learning new
technologies.

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