OPEN-SOURCE SCRIPT
TR
To anticipate that the market is entering a **trading range**, watch for the following early signs based on Al Brooks' price action strategies:
1. **Initial Doji Bar**: If the first bar of the day is a doji, it increases the chance of a trading range day because it reflects uncertainty and a lack of directional conviction.
2. **Multiple Reversals**: If there are **4-5 reversals** within the first hour of trading, this is a strong clue that the market is shifting into a range-bound mode. This two-sided trading behavior shows that neither bulls nor bears are gaining control.
3. **Weak Follow-Through**: When strong trend bars (bullish or bearish) lack follow-through in subsequent bars, it indicates that the market is not trending strongly and is more likely to stay range-bound.
4. **Tails and Overlapping Bars**: Look for:
- **Bars with prominent tails** (indicating rejection of highs/lows).
- **Bar overlap** of 50% or more with previous bars.
- **Doji bars** appearing frequently, as they signal indecision.
5. **Price Hovering Around the Moving Average**: If the price frequently crosses the moving average and the moving average becomes relatively flat, it often indicates a developing trading range.
6. **Failure of Breakouts**: Early breakout attempts (above or below prior highs/lows) that fail to sustain momentum and reverse back into the range signal the market is rejecting trends.
7. **Spike and Channel Pattern**: If a strong spike is followed by a shallow or sideways **channel**, this often serves as the first leg of a trading range.
8. **Lack of Momentum**: In trends, pullbacks are shallow and strong. In trading ranges, price action slows, moves horizontally, and legs subdivide into smaller two-legged moves.
### Summary:
Focus on reversals, bar overlap, failed breakouts, and lack of directional momentum within the first hour to spot a trading range early. Combining these signals improves your ability to switch to **range trading strategies**, such as fading the extremes of the range.
1. **Initial Doji Bar**: If the first bar of the day is a doji, it increases the chance of a trading range day because it reflects uncertainty and a lack of directional conviction.
2. **Multiple Reversals**: If there are **4-5 reversals** within the first hour of trading, this is a strong clue that the market is shifting into a range-bound mode. This two-sided trading behavior shows that neither bulls nor bears are gaining control.
3. **Weak Follow-Through**: When strong trend bars (bullish or bearish) lack follow-through in subsequent bars, it indicates that the market is not trending strongly and is more likely to stay range-bound.
4. **Tails and Overlapping Bars**: Look for:
- **Bars with prominent tails** (indicating rejection of highs/lows).
- **Bar overlap** of 50% or more with previous bars.
- **Doji bars** appearing frequently, as they signal indecision.
5. **Price Hovering Around the Moving Average**: If the price frequently crosses the moving average and the moving average becomes relatively flat, it often indicates a developing trading range.
6. **Failure of Breakouts**: Early breakout attempts (above or below prior highs/lows) that fail to sustain momentum and reverse back into the range signal the market is rejecting trends.
7. **Spike and Channel Pattern**: If a strong spike is followed by a shallow or sideways **channel**, this often serves as the first leg of a trading range.
8. **Lack of Momentum**: In trends, pullbacks are shallow and strong. In trading ranges, price action slows, moves horizontally, and legs subdivide into smaller two-legged moves.
### Summary:
Focus on reversals, bar overlap, failed breakouts, and lack of directional momentum within the first hour to spot a trading range early. Combining these signals improves your ability to switch to **range trading strategies**, such as fading the extremes of the range.
Open-source script
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in publication is governed by House rules. You can favorite it to use it on a chart.
Want to use this script on a chart?
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.