Compressed Range Bars

24 Nov

This trading strategy is based on a series of consecutively smaller ranging bars occurring in a single direction will lead to a reversal when the proper conditions are met. This setup can be taken with or without a gap and is a counter trade. Just as with the opening reversal gap fill strategy, this trading setup goes counter to the early morning activity and should be taken with caution and regard for the overall market condition as you are ready to place the trade. The best trades are the ones which are taken in the direction of the daily trend and also have the broad market indicators at their back.  It is important to note that in a very strong trend, it is not advisable to take this trade.  Many times, these breakdowns or breakouts will be shakeouts for a move back in the primary trend.  Additionally, high volume tops have a fairly high chance of being retested (forming a double top) before they move lower.  If you get stopped out on your first position, it is acceptable to take a second position if a double top forms.

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