What is range trading?
Markets only trend about 30% of the time. This fact presents a problem for traders looking to capture big moves. The rest of the time markets tend to trade in a range, but what does this mean?
A trading range occurs when a market moves consistently between two prices or levels for a definitive period of time. Like trend following, which can be used on any time frame, range trading can be seen in all time frames, from short-term five-minute charts to long-term daily and monthly charts.
Unlike trend following, range trading sees traders going both long and short (at different times) depending on the position of the price within the range. Usually in trend following traders will go with the overall direction of the trend, and buy dips in a rising trend and sell rallies in a falling one.
By contrast, range trading allows a trader to do both, since by definition a price is moving between two clear levels and (on that time frame at least) is making no progress either upward or downward
Markets only trend about 30% of the time. This fact presents a problem for traders looking to capture big moves. The rest of the time markets tend to trade in a range, but what does this mean?
A trading range occurs when a market moves consistently between two prices or levels for a definitive period of time. Like trend following, which can be used on any time frame, range trading can be seen in all time frames, from short-term five-minute charts to long-term daily and monthly charts.
Unlike trend following, range trading sees traders going both long and short (at different times) depending on the position of the price within the range. Usually in trend following traders will go with the overall direction of the trend, and buy dips in a rising trend and sell rallies in a falling one.
By contrast, range trading allows a trader to do both, since by definition a price is moving between two clear levels and (on that time frame at least) is making no progress either upward or downward