Use Caution when on The Range
Traders and investors typically dream of long-running trends, but the reality is quite different. While we all love to play strong markets to the upside and lean on the shorts when the markets are selling off heavily, it is easy to forget that markets often enter a range-bound state of Fair Value more frequently than we realize. Recognizing Fair Value is a powerful tool in any disciplined trader’s arsenal and can offer optimum profit-taking possibilities. However, we should not be afraid to play the range inside Fair Value from time to time. A simple tip is to play the extremes when markets are ranging. Avoid being tempted to play the inner Supply and Demand Zones and instead focus on the outer edges. Yes, you will have to wait longer for your setups, yet the risk to reward will always be more favorable in the long run. Look to the chart example below of EBAY for an ideal illustration of how to look for Supply and Demand Zones outside of a Fair Value range.
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