This is where ControllerFX sets itself apart and innovates. Although in a bullish trend having the previous low’s break is an indication of trend reversal. Over thousands of hours on the charts, and thousands of trades, Don Vo (owner of ControllerFX) realized that with the first break of the trend there is a HIGH likelihood of getting a fake-out. Thus causing a continuation back up. This caused many losing trades. Therefore to combat this issue, he started analyzing charts in terms of range 1’s and range 2’s, and the only time we take a “counter-trend” position, is when a range 2 breakout occurs. This takes a lot more patience, you miss out on some pips but over the long term is well worth it as it avoids many losing trades.

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You always need to be in a position to adapt to what the market tells you. There are times when the market reverses from the original daily trend, and we anticipate this by formation of a Range 2 breakout.  Quite simply, we wait for two clean breakouts against the original daily bias to confirm to us that the trend has changed.

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Range 1 & 2 doesn’t really apply if price is respecting market structure, the range 1 & 2 concept comes into play when price starts to make closures that go against the daily trend.

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In this bullish trend example, we can see:

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1. Price was steadily in an uptrend, creating new higher highs. 
2. Range 1 Breakout: price action eventually went against the trend by breaking below the support level — entering range 2
3. In range 2, price once again came up for a retest and failed to make newer highs, respecting the current resistance level
4. Range 2 Breakout: Price returns to the support level and ends up closing below range 2 — this confirms to us that it is highly likely the trend has changed and we now have the confidence to take short positions (sell) once a valid setup forms

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Here is video to help you better understand this concept:

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