Range Break Out Part 1.

Range Break Outs form the basis of my core trading. Generally speaking I call most consolidation patterns a range whether it is a triangle in one of its many guise's, a head and shoulder pattern, and so on. The point is to identify a period on the chart when price is contracting which then should lead to a period of expansion
By keeping it simple and not trying to figure out what the pattern is called I can reduce the thinking time significantly and the actual time involved whilst trading as a pattern develop and progresses through its various stages of development as one pattern develops into another and different (text book) rule sets need to be applied. What I am therefore interested in is where are the consolidation patterns extreme levels of support and resistance. This way I can treat them all in the same way and not have to worry about what it is called, has it broken a trend line? Is it a genuine break of the pattern? This list of questions can go on and on depending on the pattern and how price action develops.The two range patterns that I distinguish between are; Intraday or overnight ranges Swing or Longer term ranges The only notable difference between the two set ups is the way I identify a target. Once the range has been identified I can then think about how best to go about trading it. Generally speaking the move into the range dictate the most likely direction of the break out move, 65% of the time it is a continuation pattern 35% of the time it is a reversal pattern. With this figure in mind, if the move into the range is up I will be looking for reversals off the low (more on this later) and break outs of the high of the range. Rules for trading the range once identified. Trade the first pullback after the break out of the established range. Stop loss goes past the event that caused me to get into the trade Targets for intraday trades are based on an average days movement Targets for swing trading (longer term) ranges are the height of the pattern added to the break out point.
Range consideration Ideally the overnight range should have developed near the previous days high or low for higher probability trade set ups. If the overnight range is in the middle of the previous days high low range then this becomes a lower probability set up. (usually price will be consolidating in the bigger picture) If price is in the middle of a larger range then it is also not the best location to look for a trading opportunity. Waiting for price to be at the range highs or lows and assess for reversals or breaks is the highest probability option. Intraday example Looking at a quick example, once the overnight range has been identified and in an "ideal" location I am now waiting for the pattern to "break out" of its consolidation.