How to Properly Trade a Range Bound Instrument, Part 2

n Part 1, Matthew Cherry details how traders can use the two statistics, frequency and range to help navigate sideways markets. To read part 1, click here.

In the second part of this article we will discuss the remaining two statistics, reaction time and strength, as well as start our initial development of a trading strategy.

Reaction time and strength are both measures of the price movement, however unlike the other statistics, these two measures are highly time sensitive. To calculate reaction time, you need to count the amount of bars that fall in to the range and divide it by the total frequency of each bound. To get the best representation of this measure you need to view the price action on a shorter time frame, one where you can break the price movement down to more precise time frames. If you do not break the chart in to more manageable time frames then you can get a very different figure that can lead to miscalculations in your trading.