Following are my observations in response to some questions regarding Box trading.
Box trading: 1) Box trading happens every day. Some days it's more exact than others. Ideal box should be 60-100 ticks wide. Box less than 40 ticks has little value and tough to trade. Lot of intra day boxes are less than 40 ticks so it's best to stay away from them.
2) The most important thing is to take long or short trade at the edges of the box to have a chance. 02-15-2012 trading box was 101.30 to 101.90 from 9 am till 2.30 pm. Most of us trade with 10-15 ticks stop loss and therefore trades away from the edge of the box increases the risk of stop outs, getting out of trade prematurely etc..
3) It always look like that edge of the box is ready to be taken out and that a trader will be stopped out. At some point price gets out of the box and hit our stop loss in the process. Hopefully, a trader has taken 2-3 trades before he/she eventually gets stopped out.
4) I mostly have my order in with stop loss before price gets to the level. For example, i had orders in today to short from 101.84 area with stop loss at 102.01 way before price gets there. I also book my profits without hesitation.
5) I do not touch my trade till i get stopped out or i book my profits. In other words, lets say i am short from 101.84 with stop loss at 102.01. Price goes down to 101.70 and then bounces to 101.90. I stay put or may add to short.
It is very difficult to see position goes against you but in reality nothing has changed. When i took the short, i had agreed to stop loss of 102.01. Price basically has come back to a level where i would have taken the short any way. Thus, i may add to the short.
6) It is very difficult to trade from both side of the box. Meaning getting long at 101.30 and short at 101.84 area all day long. I generally try to stick to one side of the box.
7) At minimum, one should be aware of trading box and if does not want to trade just sit on hands. Shorting at 101.50 or going long at 101.60 or any where in between except the edges of the box had no chance with 10 ticks stop loss.
8) I take the first box trade with biggest position size i can afford and then take subsequent box trades less than original trade as i know at some point i will get stopped out.
9) I am not aware of any indicator to help in terms of how to trade the box except take the trade at the edges , put stop loss in and let the trade play out.
10) As usual these trades should be away from major news etc..
