Are people mostly only either a trend or range trader? Can you be both?

Beginner Questions
1

The books I have been reading make it sound like you can only be a range or a trend trader.

I tried trend trading the daily EURUSD using only price action but it’s been ranging for weeks. I’ve been scalping and catching more pips than sitting around waiting for it to trend. I guess I’ve been more of a range trader but if I see a trend happening, I’ll definitely jump in.

I’m pretty new to this so I was wondering, is my thinking wrong? Can you really only be a trend or range trader?

2

Hi, welcome to the forum (think I can just about say that as you’re relatively new, apologies if that is condescending!).

This is a fair question, but the thing is - as with so many trading questions - that the answer largely depends on what sort of trader you are. Personally, I am a technical trader, trading PA. I mostly try to trade with the trend, but at the end of the day a chart is a chart, and if I see a setup I like then I will take it. After all, if you see a chart with a clear range, you will often also see a series of trends as Price moves between the range’s two extremes. I have very often traded a trend on such a chart, then traded a trend reversal out of the extremity of the wider range. Then picked up the new trend in the new direction. So if the end of a trend also marks the extreme of a range, you can be trading both. For instance, if you day trade the Hourly chart up all day, then it reverses and you see on the Daily chart that you are at the top end of a Daily range, then you might trade that reversal, if you’re seeing enough rejection of a clear level of Resistance etc., then trade back down the new, Hourly trend. You have just traded both a range and a trend.

A fundamental trader will often give you a different answer, and they’d be right, for their style of trading. But for me, I just trade a chart, and can see attractive PA within either a trending or a ranging chart. And watch out for Timeframe correlation before you decide what you’re looking at!!

I hope that that helps a little. Please say if I have simply missed the point!

Happy trading,

ST

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Thanks Simon. That does make a lot of sense. I can see how fundamental traders would learn more toward trending markets.

I was also wondering about how one can calculate their own correlations between charts? I thought about starting a new thread but I might as well post it here to see if you or anyone else can answer it? I’m using MT5 and it looks like they no longer offer the past price data like MT4 did. Do you suggest using another platform to get the past price data? If so, which one?

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Personally I use eSignal, and have four Price screens tiled on my monitor. So if I am placing an EOD order I will have the screen showing 240, Daily, Weekly and Monthly (to make sure I’m not missing a serious level), if I am Intraday trading then I will generally have up 5, Hourly, 240 and Daily, entering off the Daily or the 5 minute respectively. So I am seeing the Price across various TFs at the same time. I am sure that MT5 should offer the ability to show four screens tiled at once? I know that the old MT4 did when I have played about with it in the past.

If you’re meaning more generally how do we look for correlation, then that is a whole lesson (or ten!) in itself, but basically I will look to identify a trend on, say, the Daily, then look for cycles within that on the Hourly or 240, then look for a specific setup maybe even on the 5 minutes, look for some weakening RSI or a PA rejection signal out of a level or something. If entering on the Daily for an EOD trade then I might be looking on the Hourly for similar stuff in order to get a more efficient Entry. If my Stop is 150 pips, then shaving 15 pips off that through finding an elegant Hourly level can give me a 10% boost to my trade all the way up (or down). But sorry, I might be misunderstanding the question.

5

you can do both (maybe using two different accounts, though there’s no requirement to use two), but they’re very different skills

for most forex traders trying to become steadily profitable, trading only in the direction of an existing trend is the way to go

range trading is far more difficult and requires far more experience and practice

part of the beauty of having so many different currency pairs available to trade is that it enables you plenty of opportunities to find a pair that’s trending

in theory, at least - sometimes (especially around July/August) overall forex volatility can be significantly reduced

6

Sorry, I probably didn’t word my question right.

I was reading a book that showed a table of correlations between different currency pairs, ie: EUR/USD is 94% correlated to AUD/USD over the span of 1 month but only 85% correlated over one year… and EUR/USD is 92% inversely correlated with USD/JPY over the span of 1 month and 86% inversely correlated over the span of 1 year. So, in general, EUR/USD and AUD/USD’s charts would look similar in direction whereas EUR/USD with USD/JPY would generally be opposite in direction. Since charts change all the time, the author suggested to calculate your own by importing price data from your platform… but I don’t see an option to do that on MT5.

7

yea range trading to me is pretty much scalping in my opinion. Trend trading is much easier, but you can still do both as long as you know what you’re doing.

8

My bad, I misunderstood, sorry. Kids are off school for the holidays, so the four of them are causing mayhem in the background. Which is why I am on a forum rather than scanning Price Charts!

I see what you mean. I keep it rather simpler than the advice you have read - yes, some Pairs are pretty highly correlated, but frankly a visual check will tell me all I need. I monitor some 22 or so Pairs, and if I look at the Daily for one Pair and then the Daily for another and the pattern is very similar, and then still is when I check on a lower TF, then I would only take one setup (as I’m a technical trader looking to follow my rules with correlated Pairs usually each Pair will offer me a tradeable setup), as otherwise I am backing the same move twice, which breaks my rules as I am doubling my exposure. But I don’t bother importing Price data or anything - I sit down five evenings a week and do a market scan of each of the Daily charts for my Pairs. If I see similar charts and know that those are correlated Pairs (or, frankly, even if they are not but the charts are too similar) I will simply take the highest probability trade.

9

Hello; I use both of them; although trendy market is my favorite but sometimes I use horizontal rangy market.

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Hi @g12863,

Someone can learn both trend trading and range trading strategies, but developing any particular strategy takes time. Trying to learn multiple strategies at the same time could mean you don’t end up putting enough time into any single strategy to become proficient in it.

In our experience, novice traders tend to gravitate to range trading for 4 reasons:

  1. It’s intuitive to buy low and sell high as range traders do, but counter-intuitive to buy high and sell low looking for breakouts as trend traders do.
  2. Novice traders often have the misconception that trend trading requires risking more money, when in reality you can reduce your trading size to risk more pips but fewer dollars or cents per pip.
  3. Novice traders tend to prefer the immediate gratification of a short term range trade, rather than waiting for a longer term trend trade to play out.
  4. While novice traders are often not willing to invest time in fundamental analysis to understand trends, they see range trades as low hanging fruit.

That’s not to say that range trading is bad, but often novice traders gravitate to it for the wrong reasons. Similarly, it can be good to learn and understand both range trading and trend trading to round out your skills, but often novice traders try to use both strategies at once for the wrong reasons.

For example, they may initially buy EUR/USD as a short term trade intending to risk only 50 pips. However, when the trade goes 50 pips against them, they don’t have the discipline to accept the loss. Instead, they keep the trade open hoping that it will eventually turn around. The 50 pips loss turns into a 100 pip loss, and then 200 pips.

That’s when they convince themselves they are now long term trend traders. They look for fundamental analysis that supports the idea that EUR/USD could go up 500 or 1000 pips from current levels to justify to themselves the 200 pip loss that is currently staring at them. But this is self deception.

Whatever strategy you use, make sure you set your exit plan before you open the trade, and stick to your plan. Don’t switch from range trading to trend trading, or from short term trading to long term trading, after you have already opened the trade.

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11

I used to be exclusively a swing trader but analysing my trading log forced me to change all that.

I found the winners came when a swing trade followed a trend. And lots of losers came when a swing was against the trend, especially when I was buying equities in a stock market downtrend or range or shorting equities in a stock market uptrend or range.

The answer was simple - I now follow trends only.

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