If you’re trading GBP/JPY or one of the many other pairs that are moving so painfully slowly right now you might think that the past two days have been boring. That is pretty much because the past two days really have been pretty damn boring. Ever the optimist I think there is a great learning opportunity in a market like this. Being a successful trader is all about being able to read the charts. I hate to use a stupid analogy but it really is like learning to read a new language. Until you can fluently read a chart you will likely not be a consistently successful trader. So you should see this range as an opportunity, an opportunity to see live what candles do in a range. It is also an opportunity to learn a little about range breaks. So let’s start the learning…..

When a pair is ranging the candles tend to shy away from S+R lines, scalp lines, and psych levels. Even though the highest and lowest points of the range seem random you will find that they usually aren’t. This is pretty logical but if you didn’t know already it is something to take note of. Why you ask? Well because a break through a significant line is an indication of renewed strength and when in a range renewed strength usually equals breakout.

You should know that when a pair is in a range it indicates that the bulls and bears have equal amounts of power. This means that there is equal amounts of buying and selling power, so the pair cannot move a significant amount in either direction. What needs to happen for the pair to move is either buyer or seller confidence has to rise. This is where line breaks come in, if a bullish line is broken it indicates that the bulls have some strength, probably more than the bears do. So what do buyers do? They start taking long trades and of course this increased buyer confidence causes the pair to move up. This is illustrated in the pic below:

Should you trade this? Well that really is up to you. In trading every situation is unique; I make my decision then and there if I should trade something like this. Keep in mind though that taking a range break trade is always risky so you have to be careful. Sometimes the buyers/sellers just don’t come through and that means it will fall back into the range.

It is 6 AM and I have not had any sleep yet so I kept this post short. I might expand on this when i wake up.