Welcome to this tutorial This is my personal take from multiple resources and +20 hours of research and my own experience with trading in a range-bound market.
Range-bound trading or in this case shorting in a range-bound market contains 5 simple phases:
phase A Range High + Range low forms which lead us to have a Range market. phase B Price tends to deviate above the Range High or simply sweep (upthrust) above it. Reasoning and psychology behind that= in order to catch the liquidity above the range high and trap breakout traders who just opened a long above the high before nuking to the Range Low.
phase C BOS happens in ltf , triggering a trend reversal. Supply forms below the resistance, that's where we would like to build our short position later on.
phase D ltf Range forms after the first sell-off, creating our base to revisit the supply that previously formed above it. (Ideally, you can enter a scalp long trade in this phase and close right at the supply)
phase E Price finally revisit the supply in order to test it as resistance. Any bearish price action at the supply or ltf BOS triggers our entry, targetting the Range Low as our take profit point.
There you can have a nice +4 R/R short setup, remember to place your invalidation above the newly made local high just to be safe from stop hunters ;)
Make sure to leave a like and a comment if you find this small article useful I will share 2 more topics about range bound market and how to trade it in near future so follow me on Tradingview so you don't miss them xoxo
I recently got into trading and your explanation really helped, thank you! I have one question though: How do I define the lower boundry of the supply? I see that the upper boundry of the supply zone is the last high just below the resistance but i don't understand how to define the lower boundry... I would really appreciate an answer :)
CryptoSep
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@robinkabul9, Thanks for reaching out. If you are looking for a supply, find the last green candle before the drop, and mark the lower body of that candle to its high, that's your supply zone. I will write an article on this matter real soon.
I have one question though: How do I define the lower boundry of the supply?
I see that the upper boundry of the supply zone is the last high just below the resistance but i don't understand how to define the lower boundry...
I would really appreciate an answer :)