Trade The Range Strategy
SELL
BUY
By Adam Khoo
Trade The Range Strategy
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A short term swing trading strategy for stocks in a clear defined ‘Range Channel’.
We buy stocks when they are bouncing off a strong level of support within the
Range Channel… Target is the resistance of the range
We short stocks that are bouncing off a strong level of resistance within the Range
channel… Target is the support of the range
Average Win rate 60%-70%, Average R Win of 2.5R-3R
Frequency: 5-10 trades a month
SELL
BUY
Trade The Range Strategy
Entry Rules for Long Trade
• S&P 500 is above 20MEMA
• Clearly defined resistance (tested 3 times) and clearly defined support (tested 3
times) that create a ‘Channel’.
• No additional support or resistance levels within the channel
• Preferable, price was on an uptrend before the consolidation pattern
Test 1
Test 2
Test 3
Bullish Candle
Test 1
Test 2
Test 3
Trade The Range Strategy
• Buy when price makes a bullish candle near the support level or enter a few cents
above the high of a bullish pin that appears at the support
• Stop loss is placed a few cents below the lowest point of the channel
• Profit Target is at the Resistance of the Channel
• Risk to reward ratio of at least 1:2, 1:3 is ideal (3R target ideal)
Lowest point of channel
Trade The Range Strategy
• Ideal Entry is when Price hits ‘Takes out stop losses’ from recent low and closes above
the recent low
Trade The Range Strategy
Trade The Range Strategy
Trade The Range Strategy
Trade The Range Strategy
Trade The Range Strategy
Exit and Trade Management Rules
• Move stop loss to entry price once price moves 1R in your favour
• Move stop loss to 1R profit once price moves 2R in your favour
• Repeat until Profit target is hit or stop is hit
REGL TTR Long Setup
Take Profit $52.65
$2.09 = 3.4R
$50.56 $50.62
Buy Stop Limit
1R = $0.61
Stop Loss $49.95
Lowest low of range
IYR TTR Long Setup
Take Profit $82.74
$2.93 = 2.67R
$79.81 $79.92
Buy Stop Limit
1R = $1.10
Stop Loss $78.71
Trade The Range Strategy
Setup Rules for Short Trade
• Clearly defined resistance (tested 3 times) and clearly defined support (tested 3 times)
that create a ‘Channel’
• No additional support or resistance levels within the channel
• Bearish candle or Bearish pin bar appears at the Resistance level
Bearish Candle
Test 1
Test 1
Test 2
Test 2
Test 3
Test 3
Trade The Range Strategy
Setup Rules for Long Trade
• Highest Probability Trade Occurs when…
• Upper Bollinger Band Recently Penetrated
Test 1
Test 2
Test 1
Test 3
Test 2
Test 3
Trade The Range Strategy
• Entry Rule
• Place a Sell Stop Limit order a few cents below the low of the Bearish Candle (or Bearish Pin
bar) at the resistance level
• Stop Loss Placement
• Stop loss is placed a few cents above the high of the channel. If the current High is the
highest high of the channel, then ensure the stop loss is at least 1ATR above the resistance
• Profit Target is at the Support of the Channel
• Risk to reward ratio of at least 1:2
Highest point
of channel
Stop Loss $18.92
1R = $0.63
Sell Stop Limit
$18.29$18.23
$2.78 = 4.4R
Take Profit $16.14
Screening for TTR Trades