The first thing for you to do is identify the correct industry conditions that lend themselves to range bound trading. The biggest mistake beginners make is buying and selling range bound techniques when markets are trending. The key is to monitor the markets that tend to be trending and wait till this trend ends. Once the trending routine ends, markets usually enter a prolonged stage of consolidation or array bound activity. So make sure you begin monitoring markets that are trending but don't enter markets that are trending. In this example I'm monitoring and awaiting the trend cycle to stop.
If you continue to observe specific stocks or other markets such as futures or commodities you will begin to notice how the trend becomes weaker and finally the market enters a different type of trading cycle. This is the precise time to initiate support and also resistance trading tactics. The longer the marketplace stayed in one cycle the longer it will eventually stay in the other routine. In this example you are able to see how Devon Energy Corporation gradually transitioned from trending cycle to range bound cycle.
When you isolate the range bound cycle you wish to make sure to give it every week or two to develop to be able to see if there is any directional bias. In simple terms you wish to see if the range bound cycle includes a directional slope. Even when markets are range bound and trend-less there is often times some degree of directional movement that this market has bias towards. This bias is usually an indication that the consolidation is a reversal and most of the time the range bound price action leans inside the opposite direction from the preceding trending cycle. You can see on this example how the stock favors the upside and leans up-wards. The previous trending cycle was downtrend it's the same not surprising for the array bound cycle to lean inside the opposite direction.
I want to provide you with another example to get a good idea of how you can isolate support and resistance areas together with know which direction to consider your entry and exit signals. Notice in this example Goldman Saks is trending strongly upwards for extended time frame. A good way to begin your analysis is to start monitoring stocks or other markets you trade that are trending strongly in one course. Usually cycles alternate so you'll be able to anticipate with a high level of certainty that a trending step will end and consolidation cycle will start.
After you isolate the range bound cycle and determine by which direction the market is leaning, you can begin planning your entry and exit levels strategically. Your best opportunities will occur in the event you only take trades in the direction of the slope that the industry is leaning towards. This tip will increase your profit to loss ratio together with increase the size of the winners.
Once you find the right market and observe that the trend is coming to an end you can start looking for range bound trading to start. The next step is to isolate the stove bound trading action and observe which way it slopes. You should only want to take trades inside the direction the market is sloping so give the market some time to show you which way to position on your own.
Once you isolate the array bound cycle and determine which direction it favors you can start to plan your entry and also exits around that information. In this example you are able to see how the slope is trending along and my entries are always in the direction of the trend or slope in such cases.
Range bound cycles work nicely with support and resistance buying and selling patterns. Make sure you pick markets that exhibit substantial volatility and trading range please remember to trade in the direction of the slope only. This will prevent many false signals and can increase your profit factor as well. Lastly, let the channel develop before you enter to be able to get a good idea of where the support and resistance lines will lineup.