Most of the time, when the market gets near an important long term level, it tends to trade a short term range (which is what we call the “zone” – or The SF Box).
When it gets to that level there a fierce battle between buyers and sellers and it makes the market range.
And this is the time for us to look for range trades. For instance, this is the EURNZD hourly chart:
So there are 2 important things you need to make sure before trading those ranges:
- The market is near a long term important level (blue level)
- It has clear support & resistance levels (green levels)
And the strategy is simple, just look for long opportunities around the bottom of the range, and short opportunities around the top of the range.
What happens if the market breaks through either extreme of the range? I’d trade only in the direction of the breakout.