Range trading strategy is not perfectly suitable for all ranging market conditions. Mostly, traders claim the trend trading strategies in a trading market which is used to represent profits when the price proceeds in a single direction.
But, the trading markets do not entirely follow trend trading strategies. It can spend a maximum of time laterally moving or ranging. Sometimes, these lateral movements can provide a successful forex trading strategy.
In this article, we will explain what range trading strategy is, how to do range trading forex, how range trading works in forex, and the trading indicators used in range trading strategy.
- What Is Range Trading Strategy And How To Trade In Forex
- How To Trade In Forex
- What Kind Of Strategy Can I Use For Range Trading?
- What Are The Indicators Used In Range Trading Strategy
- Range Trading Strategy With Volume Indicator
- Range Trading Strategies With Pivot Points
- Range Trading Strategy – Frequently Asked Questions
What Is Range Trading Strategy And How To Trade In Forex
Range trading is a scale of consistent highs and lows which takes advantage of different markets. By setting support and resistance of range trading strategy bands, traders can buy or sell at these limits.
Range trading strategy used by investors to utilize profitable opportunities when there is lateral movement price in the market. However, markets alternate between both trend trading strategies and range trading strategies.
It is crucial to have a range of trading strategies to take advantage of trading opportunities during different ranging market conditions.
Support and resistance level creates numerous buy and sells opportunities for traders when the prices bounce off in a ranging market. Range trading strategies are used to identify valid range-bound markets and optimal price entry and exit levels that offer to manage risk.
How To Trade In Forex
To Identify A Suitable Market
Traders should identify a non-trending market by moving the average indicator. Analyze the timescale no greater than the period. The Average Directional Index indicator is another way to measure the strength of a trend without taking into account its direction, using a scale from 1 to 100, with an indicator below 20 considered a lateral market condition.
To Identify The Trading Range Area
The next step is to identify the range trading strategy area; this needs a price to be retrieved from the support and dropped from the resistance band at least twice to verify that the price is permanently rising or dropping as part of a longer trend.
Range trading strategy areas are identified on a candlestick chart through a range bar chart based on price movement time; this allows the trader to view the volatility indicators of market conditions. A highly volatile indicator market will be displayed with maximum bars. The range trading strategy helps to remove noise from charts. Pivot points become clear, and support and resistance bands are strengthened.
Execute Range Trading
Once to set up an entry on range trading forex, a range trading strategy is supplied to buy and sell when the price hits the support and resistance level bands.
By a law of forex range trading setups, the range trading strategy algorithm will cease, and the market will break out of the range. Indicators are used to predict how and when this trading range breakout will play out is difficult.
Opening Range Breakout
When the market opens, it is possible to take advantage of range breakouts, which is the most active trading period of the day. After the market opens, traders identify the opening high and low range in the short period. The direction from which the price breaks out from this opening range indicates the trend for the rest of the day.
What Kind Of Strategy Can I Use For Range Trading?
A range trading strategy is required to identify the price levels if the technical analysis strategies used with range trading include support and resistance level, volume trends, and moving averages.
The simplest range trading strategy is to buy near the support level and sell near resistance when the range, or price channel, is established.
What Are The Indicators Used In Range Trading Strategy
Range trading strategy indicators are used to identify the market conditions that may go with the price reversals at the range’s support and resistance levels.
Range trading strategies of Technical indicators are Relative Strength Index (RSI), Commodity Channel Index (CCI), Stochastic Oscillator, and Williams Percent Range (%R).
- The %R indicator is used to identify an overbought or oversold market and to help filter potential trading signals.
- Additional range trading strategy indicators are used to filter out false trading signals.
- Technical indicators may help filter out false trading signals, and they are by no means a guarantee of positive results.
- Wide trading ranges indicate volatile markets yield greater returns with increased risk.
- The average Daily Range trading strategy(ADR) indicator indicates if the market range is higher or lower than usual.
- The Average True Indicator (ATR) includes price gaps in its calculation.
Range Trading Strategy With Volume Indicator
Volume is the essential element of a benefit’s price that range traders watch. For technical analysts, volume can help traders qualify high probability setups when applying range trading strategy. The volume should decrease when the price is about to hit the support or resistance levels and increase after bouncing from those levels in perfect range setups. Range Trading with Volume Indicators are used to check whether a price movement in the market is backed by opinion.
Volume indicators also watch out for valid price breakouts with range trading. If the price breaches with high volume, then the breakout is valid, but if the price breaches with low volume, the levels are potentially false. Traders can continue applying the range trading strategy. The best volume indicators are On Balance Volume (OBV), Volume Price Trend (VPT), Money Flow Index (MFI), Accumulation or Distribution, and Negative Volume Index (NVI).
Range Trading Strategies With Pivot Points
Pivot points are the best indicators for mapping out horizontal support and resistance levels in the market, which has a reference line (PP), there are three support lines (S1, S2, and S3), and there are three resistance lines (R1, R2, and R3). These lines allow traders to examine support and resistance levels and determine How to set up entry On Range Trading Forex and exit orders in a range-bound market.
If the price is between R1 and PP on trading, traders can look to buy at or near PP and sell at or near R1. On buying at PP, stop loss can be placed below S1 and take profit at R1. Similarly, on selling at R1, stop loss can be placed above R2 and take profit at PP. Pivot Points is a solid indicator for trading ranging strategy markets.
Traders can make it effective by combining it with Oscillators. It is also best to watch out for breakouts. If a strong pivot points line has been breached, traders could adapt to a range trading strategy in combination with the new market condition.
Range Trading Strategy – Frequently Asked Questions
#1. When does the user stop loss in range trading?
For example, if you own a stock that is currently trading at $50 and the moving average is at $46, you should set your stop loss just below $46.
#2. How to set the moving average in range trading?
When price movements stay above the moving average, the price is in an UPTREND. If price movements stay below the moving average, the price is in a DOWNTREND.
#3. How does Range Trading work in forex
Range trading mainly works for the supply and demand of the market.
#4. What are the types of Range Trading Strategies in Forex?
The types of range trading strategies available in forex are rectangle Range, Diagonal Range, and Irregular Range.
Conclusion – Range Trading Strategies with Pivot Table
Range trading strategy is a flexible method that can be applied to all financial markets. The hardest part is identifying the support and resistance bands for a range trading strategy. The buying and selling points are clear. Demo accounts are an excellent way to practice the range areas and predict the breakout points. Mastering a range trading strategy allows a trader to attempt to profit in times when the market displays no clear trend.