Learn The Stock Market And How to Trade

A trading stock market or a range bound market is when the price of the market (or individual stock) is trapped between two prices or a trend of prices.  This happens when there is lots of reasons for both the bears and the bulls to be right in their assumptions.  There a couple of fairly well known clues to fiding trading ranges and trying to take advantage of them.

• Moving Average Bound – Often the price of a stock will get trapped between a short term moving average and a long term moving average.  There is often a dynamic between the traders with a short term mentality and those fundamentalist who are following the long term path of the stock, or whole economy.  The common choice is watching between the 50 day simple moving average and the 200 day simple moving average.  However, the ideal choice will vary from stock to stock or market to market.  You’ll have to experiment.
• Fibonacci Bound – Another set of support and resistance lines which were used as the basis for the Elliot Wave Theory are fibonacci ratios.  I’ll leave the details (and coolness) of the number sequences for it’s own writing, but the basics are you’ll look for is after a big move the ups and downs of the market start get smaller.  When the market is in this mindset look for retracements of 38%, 50% and 62% from the previous high from the previous hard low.  These waves will shrink smaller and smaller within the support lines until the next big break out.  It may be difficult to tell which way the breakout will happen but you can trade within the retracement range for awhile.
• Range Bound (Squeeze) – This is a chart players favorite, and they’ll name all kinds of shapes into it.  Essentially what you are looking for is a consistent support line (price or trend of price) and lower and lower highs.  When you see this you know (or at least have a better chance) that the stock price is going to continue to trade in that range until there is almost no difference between the highs and the lows and either the bulls or bears win out.

A trading stock market is no place for complacency.  You’ll have to stay on top of your trades more until a strong direction is developed again.

Related posts:

1. Moving Averages
2. MACD – Moving Average Convergence Divergence
3. Forex Signals For Beginners
4. Trading Bollinger Bands
5. Stock Market Trading Systems