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Let's talk a little bit more about how we can use the trading range as a technical analysis tool when
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we're evaluating might be going on here.
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And as we know, the range is the distance between the low and the high of a price.
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And we learn how we can identify spikes where there's these broad ranges in terms of the high and low.
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But there's other ways that we can use trading ranges as well.
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So let's look at some of some of those and kind of have an understanding of it.
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And it can be a leading indicator as far as a price change that is coming.
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When we start seeing these ranges between high and low, there might be kind of a something's coming.
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That's why we call leading indicator versus something that's maybe more of a lagging indicator.
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So it can be very helpful that way as well.
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So if we look at trading ranges, we can look at range expansion and range contraction, you know,
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so if we look at these examples here on the left, we have range expansion.
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You can see that the price bars just that middle part and we're looking at that range are lengthening
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over time.
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You can look from going from left to right how they tend to be lengthening.
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And that would suggest the continuation pattern.
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As far as you know, if it's expanding, that whichever way it's going could be up or could be down,
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you know, could be, you know, continuing to go in that in that in that pattern or continuation if
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we look at a range contraction.
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That's where the price spikes are shortening over time, and you can see from the left to the right
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on the right hand image there how the bars are getting much, much shorter.
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And that suggests a trend reversal may be coming up soon, too.
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So if we as well as using these other indicators, we'll learn all through the course.
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You start looking at range expansion rates, contraction versus a continuation or a trend reversal might
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be being indicated by the patterns within the price bar themselves as far as what may be going on here.
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So range expansion and contraction don't tell us anything about the existing direction of the price
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move, just more so whether it would continue a continuation pattern or that trend might reverse because
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it could go either way, depending on whether they're contracting or expanding.
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But the range can expand or contract in both upward and down trends so they can do it both ways.
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But it's more of range expansion.
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Is a continuation pattern going to keep going in the same direction?
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And a range contraction might show a trend reversal or basically flattening out or changing the trend
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is the big idea behind that.
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