![]() ![]() ![]() When the day begins with a trading range that is as much as half of the recent days range and if the breakout from that range begins late in the day, you shouldnt expect the breakout to form a strong trend. Generally, if the pullback from the breakout is strong enough to make traders hesitate to enter with-trend, then a trading range is more likely to occur than a trend channel. Conversely, if the pullback is a single large bar and the breakout from the pullback is another spike, then this will likely be a channel trend day. If the pullback from the breakout goes sideways for several bars or enters a weak channel with overlapping bars, then it is usually a trending trade range day. Moreover, it is composed of fewer bars, which commonly have smaller bodies and larger shadows, and the bars overlap each other. Regardless whether it is a succession of strong trend bars, or a large gap, it usually breaks above or below the previous days high or low, whereas the spike in a trending trade range day usually remains within the previous days range. It consists of several large trend bars with small shadows and little overlap. INSTOCK TRADE PLUSThe spike of a spike plus channel trend day usually happens in the beginning of the trading day. There is a distinct difference between the spike of a spike plus channel trend (day) and the spike (breakout) which acts as a transition between two trending ranges. Moreover, the initial trading range has the so-called “ Vacuum effect”, which pulls the price back as it breaks out from the trading range, not allowing it to move too far away, thus forming a second range close to the first one. This sentiment suggests the day will likely not become a strong trend day. It reflects the markets unwillingness to perform any steep moves and the lack of urgency. The opening trading range tends to last between one and three hours and, as noted above, is usually wide 30%-50% of the recent days average range. These trend days are made up of several trading ranges, which transition into each other via breakouts. Since trend pullbacks are basically a trading range, trending range days, or at least a portion of them, can be seen during each trend day, rendering them a very common occurrence. Most reversal days begin as a trending trade range day. If the pullback however manages to extend beyond the lower trading range, then the day turns into a reversal day. However, the stronger and the more sustainable the breakout is, the higher the chance is for the day to become a spike plus channel trend day, instead of a trending trade range day. Often it succeeds to break back into the previous range, but if it does not, then the trend is considered stronger. Usually, as the second range begins to form, there is a pullback testing the previous range. ![]()
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