Education|December 23, 2010 3:12 am

What Is Range Trading

Range trading, or range-bound trading, is a trading style in which a financial product (fore example currency or stock) is watched that have either been rising off a support price or falling off a resistance price. Let’s talk in the context of forex trading. That is, every time the currency pair hits a high, it falls back to the low, and vice versa. Such a currency pair is said to be “trading in a range”, which is the opposite of trending. The range trader therefore buys the currency at or near the low price, and sells (and possibly short sells) at the high. A related approach to range trading is looking for moves outside of an established range, called a breakout (price moves up) or a breakdown (price moves down), and assume that once the range has been broken prices will continue in that direction for some time.

The same principles of range trading are equally applicable in the stock market as well as other financial markets.

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