Hello Traders,
Here is the most simple & easy explanation about a Range.
In this Lesson I will Show you how to Identify & Trade a RANGE!
These patterns are seen daily in Stocks, Forex and different markets across the Globe.
I hope you will find this information educational & informative.
Your support is appreciated with a follow, like & Comment
Lets dive Right Into it!!
What Is a Range?
Range refers to the difference between the low and high pricesover a specific time period. Range defines the difference between the highest and lowest prices traded for a defined period, such as 4H, day, Week & month. The range is marked on charts, for a single trading period, as the high and low points on a candlestick or bar.
The top of the trading range often provides price resistance, while the bottom of the trading range typically offers price support.
Understanding Trading Ranges
When the Market breaks through or falls below its trading range, it usually means there is momentum (positive or negative) building. A breakout occurs when the price of the Market breaks above a trading range, while a breakdown happens when the price falls below a trading range. Typically, breakouts and breakdowns are more reliable when they are accompanied by a large volume, which suggests widespread participation by traders and investors.
Many traders look at the duration of a trading range. Large trending moves often follow extended range-bound periods. Day traders frequently use the trading range of the first half-hour of the trading session as a reference point for their intraday strategies. For example, a trader might buy a stock if it breaks above its opening trading range.
Ranges and Volatility
Since price volatility is seen as equivalent to risk, a Markets trading range is a good indicator of relative riskiness.
A conservative Trader prefers a Market with smaller price fluctuations compared to Market that are susceptible to significant gyrations. Such an trader may prefer to Trade in more stable Market rather than in more unstable Market.
Trading Range Strategies
Range-bound trading is a trading strategy that seeks to identify and capitalize on a Market trading within price channels. After finding major support and resistance levels and connecting them with horizontal trendlines, a trader can buy a at the lower trendline support (bottom of the channel) and sell it at the upper trendline resistance (top of the channel).
Support and Resistance
If the Market is in a well-established trading range, traders can buy when the price approaches its support and sell when it reaches the level of resistance. Technical indicators, such as the relative strength index (RSI), stochastic oscillator, and the commodity channel index (CCI), can be used to confirm overbought and oversold conditions when price oscillates within a trading range.
For example, a trader could enter a long position when the price is trading at support, and the RSI gives an oversold reading below 30. Alternatively, the trader may decide to open a short position when the RSI moves into overbought territory above 70. A stop-loss order should be placed just outside of the trading range to minimize risk.
Breakouts and Breakdowns
Traders can enter in the direction of a breakout or breakdown from a trading range. To confirm the move is valid, traders should use price action & Structure Break.
For instance, there should be a significant increase in volume on the initial breakout or breakdown as well as several closes outside the trading range ( Structure Break). Instead of chasing the price, traders may want to wait for a retracement / Correction before entering a trade. For example, a buy limit order could be placed just above the top of the trading range, which now acts as a support level.
Thanks for Reading this article, I hope that it was informative and educational As always, If you have any questions / Comment or Concern Please feel free to leave them below.
Thanks to @TradingView for this lovely platform to educate and grow together :)
Hope to see you in the next Educational Post!
Global Fx Education
Here is the most simple & easy explanation about a Range.
In this Lesson I will Show you how to Identify & Trade a RANGE!
These patterns are seen daily in Stocks, Forex and different markets across the Globe.
I hope you will find this information educational & informative.
Your support is appreciated with a follow, like & Comment
Lets dive Right Into it!!
What Is a Range?
Range refers to the difference between the low and high pricesover a specific time period. Range defines the difference between the highest and lowest prices traded for a defined period, such as 4H, day, Week & month. The range is marked on charts, for a single trading period, as the high and low points on a candlestick or bar.
The top of the trading range often provides price resistance, while the bottom of the trading range typically offers price support.
Understanding Trading Ranges
When the Market breaks through or falls below its trading range, it usually means there is momentum (positive or negative) building. A breakout occurs when the price of the Market breaks above a trading range, while a breakdown happens when the price falls below a trading range. Typically, breakouts and breakdowns are more reliable when they are accompanied by a large volume, which suggests widespread participation by traders and investors.
Many traders look at the duration of a trading range. Large trending moves often follow extended range-bound periods. Day traders frequently use the trading range of the first half-hour of the trading session as a reference point for their intraday strategies. For example, a trader might buy a stock if it breaks above its opening trading range.
Ranges and Volatility
Since price volatility is seen as equivalent to risk, a Markets trading range is a good indicator of relative riskiness.
A conservative Trader prefers a Market with smaller price fluctuations compared to Market that are susceptible to significant gyrations. Such an trader may prefer to Trade in more stable Market rather than in more unstable Market.
Trading Range Strategies
Range-bound trading is a trading strategy that seeks to identify and capitalize on a Market trading within price channels. After finding major support and resistance levels and connecting them with horizontal trendlines, a trader can buy a at the lower trendline support (bottom of the channel) and sell it at the upper trendline resistance (top of the channel).
Support and Resistance
If the Market is in a well-established trading range, traders can buy when the price approaches its support and sell when it reaches the level of resistance. Technical indicators, such as the relative strength index (RSI), stochastic oscillator, and the commodity channel index (CCI), can be used to confirm overbought and oversold conditions when price oscillates within a trading range.
For example, a trader could enter a long position when the price is trading at support, and the RSI gives an oversold reading below 30. Alternatively, the trader may decide to open a short position when the RSI moves into overbought territory above 70. A stop-loss order should be placed just outside of the trading range to minimize risk.
Breakouts and Breakdowns
Traders can enter in the direction of a breakout or breakdown from a trading range. To confirm the move is valid, traders should use price action & Structure Break.
For instance, there should be a significant increase in volume on the initial breakout or breakdown as well as several closes outside the trading range ( Structure Break). Instead of chasing the price, traders may want to wait for a retracement / Correction before entering a trade. For example, a buy limit order could be placed just above the top of the trading range, which now acts as a support level.
Thanks for Reading this article, I hope that it was informative and educational As always, If you have any questions / Comment or Concern Please feel free to leave them below.
Thanks to @TradingView for this lovely platform to educate and grow together :)
Hope to see you in the next Educational Post!
Global Fx Education
