{"id":586,"date":"2009-05-18T16:20:58","date_gmt":"2009-05-18T21:20:58","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=586"},"modified":"2023-05-24T17:30:12","modified_gmt":"2023-05-24T21:30:12","slug":"momentum-versus-range-bound-trading","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/momentum-versus-range-bound-trading","title":{"rendered":"Momentum Versus Range-bound Trading"},"content":{"rendered":"

Jarrett wrote:<\/p>\n

“How do you know when a stock will go from momentum\/ trending nicely, to consolidating. This always get me in trouble. I will trade a stock, like IBN, from short side 32 to 30, than it traded 30, so i got short, then it bounces to 30.20 i cover, back and forth, and it turns out the stock is in a range 30-30.50. I guess i should wait for a nice break below 30, but I fear that i will miss a good entry.”<\/p>\n

I think this is a great question, and one that I think all developing traders have to think about. Looking at the chart of IBN from this morning, it traded down from 32 to 30 in the first few minutes of the day. I wasn’t watching it, so I’m not sure if there was a buyer that was refreshing at that level, or if there were plenty of bids at that level.<\/p>\n

Regardless, the one cardinal rule you violated here: you got short before the level broke. I understand that you want to get great entry prices, but you have to wait for the level to drop!<\/p>\n

In all reality, you’re not going to really know when a stock goes from being a momentum play to a range play, until it actually happens. The more times you see it, the longer you trade, the faster you’ll be able to spot when and how the stock changes. When you see the range develop, you should look to play it, from both ends. In your case, with a short bias, once you realize it’s in a range, you want to make sure you’re short the top of the range, covering most or all at the bottom of the range, and making sure to get back into the short side once it breaks out to the downside.<\/p>\n

The only time I personally would begin to hit the stock before it broke 30, was if and when I saw a seller come in under 10 cents. When I see a buyer or seller so close to either end of the range, I expect that there could be a move out of the range, in which case we could get a momentum move. But unless I see that, I would be waiting for the level to drop, but most importantly, for the offer to hold below the level. Remember, the level dropping could just be the buyer shaking out the weak hands before taking the stock higher. To get aggressively short IBN, I would need to see someone selling the stock below $30.<\/p>\n

And just one more thought with regards to entry, and we talk about this a lot in our video review sessions<\/a>: just because you’re in from a higher price doesn’t necessarily make it a better short. In the case of IBN, the better short is when you spot a seller below 30. Maybe you don’t see anyone stick the offer until 29.93. In my opinion that’s a better short, with much less risk than getting short at 30 and maybe having the stock spike 15 cents against you in a squeeze.<\/p>\n

Don’t forget to follow us on twitter<\/a>.<\/p>\n

\"IBN<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Jarrett wrote: “How do you know when a stock will go from momentum\/ trending nicely, to consolidating. This always get me in trouble. I will trade a stock, like IBN, from short side 32 to 30, than it traded 30, so i got short, then it bounces to 30.20 i cover, back and forth, and it turns out the stock … Read More<\/a><\/p>\n","protected":false},"author":167,"featured_media":587,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[4676,18,301],"class_list":["post-586","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-trading_theory","tag-day-trading","tag-smb-capital","tag-trading-blog"],"yoast_head":"\nMomentum Versus Range-bound Trading | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/momentum-versus-range-bound-trading\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Momentum Versus Range-bound Trading | SMB Training\" \/>\n<meta property=\"og:description\" content=\"Jarrett wrote: “How do you know when a stock will go from momentum\/ trending nicely, to consolidating. This always get me in trouble. I will trade a stock, like IBN, from short side 32 to 30, than it traded 30, so i got short, then it bounces to 30.20 i cover, back and forth, and it turns out the stock ... Read More\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.smbtraining.com\/blog\/momentum-versus-range-bound-trading\" \/>\n<meta property=\"og:site_name\" content=\"SMB Training Blog\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/smbcap\/\" \/>\n<meta property=\"article:published_time\" content=\"2009-05-18T21:20:58+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-05-24T21:30:12+00:00\" \/>\n<meta name=\"author\" content=\"Gualberto\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@smbcapital\" \/>\n<meta name=\"twitter:site\" content=\"@smbcapital\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Gualberto\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" 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