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Step Two-determine Trading Time Horizon
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Once you have determined that a currency pair is either range-bound or trending, it is time to determine how long you plan on holding the trade. The following is a set of guidelines and indicators that I use for trading dif­ferent time frames. Not all of the guidelines need to be met, but the more guidelines that are met, the more solid the trading opportunity.

Intraday Range Trade Rules

•  Use hourly charts to determine entry points and daily charts to confirm that a range trade exists on a longer time frame.

•  Use oscillators to determine entry point within range.

•  Look for short-dated risk reversals to be near choice.

•  Look for reversal in oscillators (RSI or stochastics at extreme point).

•  It is a stronger trade when prices fail at key resistance or hold key support levels (use Fibonacci retracement points and moving averages).

Indicators Stochastics, MACD, RSI, Bollinger bands, options, Fi­bonacci retracement levels.

Medium-Term Range Trade

Rules

•  Use daily charts.

•  There are two ways to range trade in the medium term: position for upcoming range trading opportunities or get involved in existing ranges:

Upcoming range opportunities: Look for high-volatility environ­ments, where short-term implied volatilities are significantly higher than longer-term volatilities; seek reversion back to the moan environ­ments.

Existing ranges: Use Bollinger bands to identify existing ranges.

•  Look for reversals in oscillators such as RSI and stochastics.

•  Make sure ADX is below 25 and ideally falling.

•  Look for medium-term risk reversals near choice.

•  Confirm with price action—failure at key range resistances and bounces on key range supports (using traditional technical indicators).

Indicators Options, Bollinger bonds, stochastics, MACD, RSI, Fi­bonacci retracement levels.

Medium-Term Trend trade

Rules

•  Look for developing trend on daily charts and use weekly charts for confirmation.

•  Refer back to the characteristics of a trending environment—look for those parameters to be met,

•  Buy breakout/retracement scenarios on key Fibonacci levels or mov­ing averages.

•  Look for no major resistance levels in front of trade.

•  Look for candlestick pattern confirmation.

•  Look for moving average confluence to be on same side of trade.

•  Enter on a break of significant high or low.

•  The ideal is to wait for volatilities to contract before gelling in.

•  Look for fundamentals to also be supportive of trade—growth and interest rates. You want to see a string of economic surprises or disappointments, depending on directional bias.

Indicators ADX, parabolic stop and reversal (SAR), RSI, Ichimoku clouds (a Japanese formation), Elliott waves, Fibonacci.

Medium-Term Breakout Trade Rules

•  Use daily charts.

•  Look for contraction in short-term volatility to a point where it is sharply below long-term volatility.

•  Use pivot points to determine whether a break is a true break or a false break.

•  Look for moving average confluences to be supportive of trade.

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