Updated: Aug 26
The first part of 2020 has been one that will go down in history, the volume has been great and the volatility has been extreme. Now that we are back to pre-covid levels we can see that price is slowing down. When price slows down, it can trap traders who are still trading like we are moving extremely fast. The entries and signals in a fast moving market will be slightly different then when price slows down. The same trade that took a few minutes can end up taking a few hours. You will need to make sure your expectations are inline with the current market trend. The past two weeks have seen an average New York session range of about 20 points on a good day.
When price is moving slow and stuck in a tight range, it is extreme important to know where your stop loss is going to be. In these tight ranges price will sometimes pop and you will be left holding the bag if your stop loss is not in the proper place. You should always be trading with a stop loss there is no excuse to not use a stop loss. With out using a stop loss you leave your account open to extreme losses and the possibility of blowing up your account.
When price is stuck in a tight range it is always recommended not to trade but if you do decide to place trades or price fits your rules then you need to select the proper level for your stop loss. Many times it is good practice to place a stop losses under a support level or above a resistance level depending on that direction you're trading ( short or long). Personally I prefer to always leave a 1-2 point cushion when selecting levels. Many times price will come back down and test these levels before reversing.
Take Profit Levels
If stop losses are number one then take profit levels (T/P) are number two. When price is stuck in a 15-20 point range then you might want to start focusing on taking smaller traders. Take for example the ES, if price is stuck in a 15 point range then it would be unrealistic to have a 10 point take profit level. A 10 point T/P is two thirds of the current range, aim for small chunks of the range if you are going to trade inside the range. You will never get the full extent of a move and if you do then consider yourself lucky.
When price slows down it is common to have your intra-day trades take much longer. What use to be a trade that last for a few minutes can now last for a few hours. This is where having the proper mindset will help you. If you see price is only moving 10 points in a few hours then don't expect to enter into a trade and have your 5 points in a few seconds. Get comfortable with sitting in trades for awhile. We all want to get into a trade and out of a trade relatively fast but some times that's not possible. Working on your expectations during these slow times will relieve stress and help you understand whats going on in the market.
In summary when price starts to slow down its time to work on protecting our capital, with our capital we can't make any money! Always trade with a stop loss and always protect your account. Next is T/P levels, be realistic and don't shoot for the moon when price is stuck in a 15 point range. Take a chunk of the trend and move on. Last but not least is time, get used to waiting on your trades to play out. Make sure to give price the time it needs to move in your direction but don't get caught bag holding, know when it enter and when to exit.