Trading Price Action Moves Part 1: Range Patterns

Focus: STRATEGIES

Ken Calhoun Image Ken Calhoun President, TradeMastery.com

One of the challenging aspects to active trading is the information overload that many traders face, by using overly complicated technical indicators, says professional trader, Ken Calhoun of TradeMastery.com and DaytradingUniversity.com.

In this three-part series of articles we’ll focus on how to use simpler price action moves (along with basic technical indicators like volume), to identify potential trading opportunities in an easy-to-follow, straightforward manner. Many top professional traders also rely primarily on price action to help identify entries and exits.

Price Action Patterns To Look For When Entering a Trade
One of the first major patterns to identify is multi-day major high-low ranges in the stocks being traded. In Figure 1, [Prologic, Inc. (PLD)], it’s evident that the trading range is just over 1.0 point (from 32.8 to 32.9). This major range is the first piece of information to use when developing a trading plan for each new entry.

chart
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For example, if a trader now enters a trade at 34.5, we use this 1-point range to develop a price target (34.5 + 1 point = 35.5). Looking for the depth of major cup patterns as seen in this chart is also helpful.