How to Trade Consistent Profits in a Tight Range
Since launching Cignals, I’ve been asked quite frequently by our members about ways to make consistent profits in a low volatility and range-bound environment, similar to the one we’ve been experiencing lately in the Bitcoin market. Historically, most of Bitcoin’s bear markets take about eighteen months or so to fully bottom out before the catalyst for the next bull cycle presents itself. Using that logic, by comparison, we are following roughly the same pattern as the 2019 cycle. During that cycle, Bitcoin corrected around 80% then rallied off the pico-bottom ($2900) and found acceptance ~$8000/$9000 area. From there, a brutal multi-month range ensued and volatility was all but dead.
Obviously, during the onset of the COVID-19 pandemic, Bitcoin retested the $3k area before taking off over the previous cycle’s pico-top ($19k) and on to new ATH’s ($69k). This time around, we are looking at similar circumstances in terms of a bottom being placed and subsequent recovery in price. There is no way to know yet if the current $15k bottom will hold and launch us to new highs into the halving cycle and various spot-ETF approvals that should coincide next year. However, barring any liquidity shocks that produce heavy sell-side pressure and take us under the $15k area, Bitcoin should have a solid base in the mid-teens that if revisited, will provide the buying opportunity of a lifetime for most.
Now that we’ve illustrated the similarities between the previous cycle and the one we are currently in, let’s dive into the simplest ways to take advantage of this multi-month range-bound environment. If you are new to order flow, volume profile, and auction theory, my suggestion would be to head over to our YouTube channel so you can go through the current playlists to learn more about how to use these concepts effectively. You can also browse our Substack as well as our Twitter profile for more info! Assuming you’ve taken the time to understand the three basic volume profile setups that frequently occur across time frames, and how to interpret where value is found, we can begin to jump into how to take advantage of the chop!
As you can clearly see in the example above, we are set on a 30M volume cluster using delta mode and currently are trading in a 30H range with a P-shaped profile building and vPOC (volume point of control) directly in the middle of the bodies of the various candles that you see here. There are some debates about this, but when we see P-shaped profiles, it’s an indication that the price of an asset still has more room to move higher. That doesn’t mean we want to buy just anywhere, it is simply a clue that we have room to continue extending higher and it may make sense to find an area on pullbacks that provides enough value to enter a scalp long. Keep in mind it’s always helpful to go across time frames, starting from the highest time frames (1D-12H-4H-1H-30M-15M-5M), and work your way down to the lowest, in order to see where levels of interest overlap.
In this example, we see that the $26.55/.5k area has provided a great deal of support for rebounds back towards $26.8k. That would have grossed you roughly $250-$300 per coin (before fees) profit on scalp longs! Notice that the $26.5k area coincides with areas of low volume nodes (LVNs) which indicate rejection and indecision. We don’t want to be trading with the majority inside of high volume nodes (HVNs), so we wait for a pullback towards the LVN areas and enter there for a test of highs. In a range-bound environment, you will likely get a break of previous highs, which should give you a profitable exit for the scalp long before a pullback occurs, usually to the base of the HVN area, or dips slightly back into the LVN cluster again. This could represent another opportunity to get back into the trade and ride it again to the top of the profile and beyond.
As you can see in the example above, this is the same chart as before, but after the scalp long played out. We cleared some unfinished business/imbalance out at the profile highs giving us a nice profit for the trade, before pulling back to the base of the HVN cluster (as explained above) and potentially giving us a second chance at the LVN cluster slightly below for another round at the scalp long into the highs. This process can be repeated with low risk if you use stops to protect yourself from the market losing support (or resistance) and breaking out of the range. In a more balanced market environment, you can even trade LVNs into HVNs if there is enough room for profit net of fees. Keep in mind, all of this logic can also be applied in reverse for short scalps, provided there is a b-shaped profile setup present (same logic in reverse), and that you understand the basic setups profiles often present (visit our YouTube page to learn more).
The lowercase b should not be confused with B-shaped (capital B) profiles which are called double-distributions! We will dive deeper into this all in our next installment of Consistent Profits in a Tight Range. This first installment was meant to give you an extremely simple way to profit from a basic scalp-long setup that occurs quite frequently in range-bound environments such as the type we are currently experiencing in the Bitcoin market. Make sure you sign up for your Cignals account so you can use our platform to track the order flow of various crypto assets in real-time and take advantage of these setups! If you’ve enjoyed this article, please give it a clap and subscribe! Feel free to join our Discord as well, our community loves to discuss all things trading!
