What is Range Trading?

You trade frequently with the two main objectives when you trade: to make as much profit as possible and to minimize losses. You can use a variety of strategies and techniques to accomplish your goals. The range trading technique is one such technique, which is quickly gaining popularity. This article will explain what range trading is and the different types.

What's range trading ?

Range trading, a popular trading strategy, helps to identify overbought or oversold assets (known also as the support/resistance areas). Range traders purchase assets during support or oversold periods and then sell them during overbought periods or resistance periods. Although you can use the range trading strategy anytime, it is most effective when there is no clear trend or direction in the market. This technique is most effective in a market that is trending, especially if the market's directional bias is not taken into account.

4 types

It is important to learn about the various ranges that are available in order to support your trading strategy. You will typically come across four ranges. These ranges are listed below:

1. The rectangular range

A rectangular range is one that is characterized by sideways and horizontal price movements. These price movements occur between a lower support or a higher resistance. The rectangular range appears on indicators and charts for most market conditions. However, it is not as common as the continuation or channel ranges. The rectangular range is used to indicate a consolidation period. It tends to have shorter time frames that most other ranges and thus leads to quicker trading opportunities.

2. The Diagonal range

These range traders love diagonal ranges, which can be found in price channels. This type of range trading sees breakouts occurring at the opposite end to the trending movement. The trend channel can be either rectangular, narrowing, or broadening and the price movements are sloping. This gives traders an advantage, allowing them to predict breakouts that could help them make a profit.

3. The continuation range

The continuation range is a trading chart pattern that appears during a trend. This range is characterized by pennants, pennants, wedges triangles, and flags. It usually occurs in corrections against dominant trends. You can trade this range as a range, or a breakout depending on your trading time. Bullish or bearish continuation ranges may occur at any moment in real-time. This range can also occur in the midst of a trend or ongoing pattern, sometimes leading to an instant breakout. This is a great way for traders to quickly open positions and score big profits.

4. The Irregular ranges

An irregular range is the fourth type of trading ranges. Most ranges are not characterized by obvious patterns at first glance. An irregular trend is one that occurs close to a pivot line. Support and resistance lines will then appear around it. Although it is difficult to identify the support and resistance ideas within an irregular range, trading close to the pivot axis can provide many opportunities. If you can identify the resistance lines within the range, it can be very profitable.

Last note:

You now know the basics of range trading.