low. With channel ranges especially the shorter duration ones, breakouts tend to happen in the opposite direction. If the trader uses high leverage he or she leaves very little room to be wrong. These are simply diagonal ranges. Here the range sees a strong upside breakout. This margin of error means giving up some profit, but it leads to fewer loss trades. Figure 2 below shows an example of a rectangular range. Range trading techniques forexop, it is not difficult to spot a range in a price chart. Range trading is a strategy that takes advantage of lower volatility sideways movements of the currency market.
This article covers the most common types of ranges in forex markets and how to trade them. The trader may get stopped out five or six times, but if he or she is properly positioned for a large move - like the one in EUR /USD between Sept and Dec 2004 when the pair rose more than 12 cents, or 1,200 pips. With US1.6 trillion of average daily turnover, the currency market dwarfs the stock and bond markets in size. Trading with very tight stops can often result in 10 or even 20 consecutive stop outs before the trader can find a trade with strong momentum and directionality. But it can also be narrowing or broadening. Range Types, rectangular range, with a rectangular range the price moves sideways between an upper resistance and a lower support which are roughly horizontal. If EUR/USD rises.3500 and then turns back down hitting.3000, the range trader would harvest a handsome profit, especially if the currency moves back and forth in its climb.3500 and its fall.3000. In a 10K lot each individual pip is worth only 1 instead of 10, so the same hypothetical trader with a 10,000 account can have a stop-loss budget of 200 pips instead of only 20 pips. (For background reading, see The Most Popular Forex Currencies.) The Market Always Wins Of course few traders have the discipline to take stop losses continuously. Trend or range are two distinct price properties requiring almost diametrically opposed mindsets and money-management techniques. Figure 2: Using indicators to find range reversals. .