Range trading is a forex trading strategy that involves taking advantage of the market?s tendency to trade within certain ranges. By recognizing and understanding these ranges, a trader can identify potential entry and exit points, and plan their trades accordingly. Range trading is beneficial to forex traders, as it provides a way to take advantage of short-term price movements within a certain range, which can lead to consistent profits.
One of the first steps in understanding range trading is to identify the range. This can be done by looking at the price action over a period of time to determine the highest and lowest prices that have been reached in the market. Once the range has been identified, traders can look for opportunities to buy at the lower end of the range and sell at the higher end. They can also use technical indicators and chart patterns to help them identify potential entry and exit points.
Next, traders need to understand the dynamics of the range. This means understanding the factors that drive prices within the range, such as news, economic data, and other market conditions. By understanding these dynamics, traders can better anticipate when the range may break and when it may remain within its boundaries.
