How to Determine and Use Locked-in Ranges. Step by Step
2018-03-05  1091

 

Locked-in Range (abbr. LR) is the trading range in which the volume of open positions accumulates, making the price change to the side where the prevailing volume of open positions will be locked at a loss, because the price will no longer allow to close in profits or break-even.

STEP 1. Determining the prices and time of a LR

Finding the high traded volume range within TPSL 1 Levels which means a high possibility of accumulated open positions with not intraday interest.

STEP 2. Waiting for a TPSL 1 Level Breakout

Take Profit Stop Loss level (abbr. TPSL level) is the price level at which sellers and buyers will exit the market, closing their open positions by take-profits and stop-losses.

STEP 3. Determining the direction and degree of open positions’ imbalance of a LR

LRA Basis: It is not profitable for a market maker to return the price into the LR with high volume of unidirectional open positions, so that loss-making positions cannot close at break-even levels.

Without knowing the direction and volume of open positions within a LR and the direction and volume of closed positions after the breakout of TPSL level, it is only possible to focus on the average scenario of volume’s appearance and the time spent out of the LR.

Figure. Average scenario for determining the volume’s appearance

STEP 4. Confirming or Changing the direction and degree of open positions’ imbalance

Confirming of LR is a price out-range quotation for the next trading day (after TPSL 1 Level Breakout) without the price's return to the LR.

We can assume a False Breakout only with Low Degree of Volume's Appearance and price out-range quotation must be shorter in time than in the considered range. In cases of Medium and High Volume Appearance, a price return means an insufficient imbalance of open positions of the range and that is LR cancellation.

 

Example 1. LR Determination

If the price is above support LR we are looking for opportunities to open Long positions.

If the price is below resistance LR we are looking for opportunities to open Short positions.

 

Example 2. False Breakout

If the price is above support LR we are looking for opportunities to open Long positions.

If the price is below resistance LR we are looking for opportunities to open Short positions.

 

Example 3. LR Cancellation

When support LR is cancelled we are looking for opportunities to open Short positions.

When resistance LR is cancelled we are looking for opportunities to open Long positions.

Tom's Note

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  • QUESTION: 6C Sell?
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  • QUESTION: Have you thought about making LRA reports for bitcoin futures?
  • ANSWER: Very low OI http://www.cmegroup.com/trading/equity-index/us-index/bitcoin_quotes_volume_voi.html tells us that there is no interest for market makers. Moreover the CME futures price will never be the basis of the Bitcoin price as the Bitcoin price is quoted by other exchanges.
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  • QUESTION: Hi Tom , what is the biggest drawdown of the deposit you had on this method of analysis?
  • ANSWER: Hi, LRA or LRA Reports are not the trading signals. It's analysis for understanding what is going on in the market. LRA gives us an understanding of the market OI disbalance, so we get the cause-effect direction to open our positions. LRA gives you the direction to trade by any strategy. LRA is the beginning of the trading day for any professional trader. So not only you see the Locked-in Ranges and not only you try to use it. Each trader use LRA by his own method and so has his own trading result. Therefore it is incorrect to apply the term "drawdown" to Locked-in Range Analysis. With the help of LRA the market's uncertainty can be, if not minimized, then significantly reduced. More information is owned only by the market-making system that provides us with all market liquidity.
  • QUESTION: thanks to LRA method, I stopped trading every day
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  • QUESTION: CL Buy?
  • ANSWER: No. There is no Locked-in Ranges
  • QUESTION: Thanks to your reports, I'm learning to analyze futures and my analysis coincides with yours already
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  • ANSWER: Cause & Effect trading is the one way to make money in markets
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  • QUESTION: All Indexes Short by LRA?
  • ANSWER: Yes as we have resistance LRs (3/3).
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  • QUESTION: how we can work in intraday signals with your reports ?
  • ANSWER: LRA gives us an understanding of the market OI disbalance, so we get the cause-effect direction to open our positions
  • QUESTION: Canadian Dollar Short?
  • ANSWER: No. We need the resistance LR for a short.
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  • QUESTION: Lana Orlovskaya said that the market maker is no longer on the stock exchange?
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  • QUESTION: I’ve reviewed your book several times and I am still not understanding how you find the LRA zones. Can you provide just one clear step by step example? Are you looking at open interest reports and comparing values then finding a range that broke out that day, validating with volume? If not, maybe your example will help me and anyone else who is lost.
  • ANSWER: Good question. Thank you. No problem about examples. I'll try to create a new article "How to determine Locked-in Ranges. Step by step" this weekend
  • QUESTION: In your book you say market makers can see.. 1) Data featuring all existing placed limited orders. 2) Data featuring all existing placed stop orders. 3) Data featuring all open positions: price, volume, and side of order (buy/sell)..... As a retail trader, we can only see #1, correct? No way to see #2/3?
  • ANSWER: Yes, we can only see #1. Moreover, market makers to see #2 & #3 use not entirely legitimate methods
  • QUESTION: February 21 is my best trading day ever !! ! I can't believe that your LRA method can be so accurate.
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  • QUESTION: Tom you are god!! I like today' short ES!))
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  • QUESTION: When your LRA mentoring begins?
  • ANSWER: Plan in March. You will receive an email notification if you fill out the Form.
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  • ANSWER: Yes, a cancellation of the previous support LR plus a formation of the new resistance LR is a good signal to enter the short
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  • QUESTION: I'vev already earned more than the last 10 years of my "trading" in January. Thank you Tom! You are the greatest market guru!!!!
  • ANSWER: Thank you. Yes, LRA is like a grail in comparison with other methods of analysis. January is really a very profitable month
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