The Morning Review: Trading Ranges Confuse

As the Nifty fell to 3930 on Tuesday (yesterday) there was a sense of panic. Yet, the Index recovered all its losses to close higher than Monday. As I write this at 7:58 AM, Asia is higher, with the Dow having closed 140 + points up.
Now, a breakdown from the trading range is a signal that the Market has decided to move to the downside. Within this action, there will be many days of counter trend moves, as yesterday, and maybe today. Not just this, it is always possible that the breakdown was false, with a new up move starting again.
Then, what should traders do ? It is possible that a technical move may go wrong (example: a breakdown from the trading range may have been false). Yet, the safest method of trading is to follow the chart signals. Even after accounting for the wrong trades, the net result is a profit. Ask yourself: what is the other method of taking trading decisions ?

It is the nature of the trading range to ignite optimism when the prices are at the top of the range (maybe they will break out!) and pessimism when they are at the support levels (maybe they will break down). Once a move ouf of the range takes place, it is wise to accept it unless proved otherwise.