Читать книгу Forex Trading Making Pip By Pip - Speedy Publishing - Страница 8

Chapter 5- Explain the Day Trading Strategy Known as Range Trading

You can only do range trading with a stock that is showing some movement or a lot of movement, going high and low almost randomly. What that shows is that there is a lot of interest in that stock. If a stock is not showing movement, that is, going up and down in price, you, really, can't do range trading with that stock. A "range" is from one target price to another or a spread, say, the range is from 6 to 15. The low range is 6 and the high range is 15. If a stock opens at 6 and jumps to 15, your range for the stock is 6 to 15.

You can do range trading when a stock shows that kind of activity since it shows an active interest in the stock. If a stock is staying flat at one price, there is no point in even trying to do range trading with it. When you have found a stock that has shown a regular pattern of trading following a range from 6 to 15, you can track that stock. If that range trading continues over a period of time, you can predict when that stock will be at a specific price since its range is from 6 to 15.

Your decision now will be based on what you hope to get by becoming a buyer in that stock. You can wait until the stock hits its lowest range price and buy in and sell when it hits its highest range price. However, while waiting, you might see that your tracked stock has hit a higher range than 15, say 20. Your stock has now broken out of its traded range. You need to figure out why that stock has jumped out of range. If your research into the tracked stock proves that the company whose stock is being sold has made some bigger profits or has discovered some new product, you can jump in and safely, hopefully, buy into the stock hoping to cash in on the new range that the stock will show in the future as the profits grow or the product gets sold to consumers.

Range trading can work, successfully, for someone who has a lot of money to invest and is looking to make a profit. Keeping a list of stocks that show a past performance of going up and down in price lets you buy in low and sell out high. Your profit is what you are looking to get by doing range trading. You can't do that with a stock that sells at 2 and keeps going up by 1 dollar each day, predictably. Your buying in at any price is your option but isn't range trading.

Buying from stocks that sell on the market much like a teeter totter is doing range trading. Your only concern is that you don't sell out when your stock doesn't go predictably lower but jumps higher and out of range, unexpectedly. However, those freak occurrences in trading are to be expected, at any rate. Your objective in range trading is getting in on the low range and selling when you see a profit that fits in with your planned strategy in trading with that stock.

Participating in range trading means spending a lot of time learning about your targeted stocks, which trade in a predictable pattern, or range from low to high, and from high to low in a range pattern in trading. You want to know if the company whose stocks are traded in that fashion is solvent. You also want to know what that company sells. If that stock is issued by a group that pays out dividends, you might have a clue as to when that stock will go lower and why it will go higher.

Many range traded stocks pay dividends. When the dividends are disbursed, the stock price drops. That encourages buyers to come into the stock as investors. Dividends are paid in a predictable fashion and the day trader should have some clue as to when a stock company is going to disburse dividends or interest, so to speak, to its investors. Usually, a day trader in range trading doesn't care about getting dividends and trades the stock hoping to make a profit by selling it at a higher range.

If he or she does care about dividends, the day trader doing range trading will hold on to his shares until he gets his dividends. He can opt to keep his shares and continue getting dividends or sell out at a higher range and get a profit. That positive scenario can always go in the opposite direction, of course, as day trading is much like playing roulette and the day trader could buy a stock at a low range and watch it go even lower.