An Introduction to Range Trading

As an investor or trader it is good you have different strategies for trading the crypto or forex market range trading has been a nice strategy that smart traders are using to make profits within a short period.

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A sideway movement of price always happens in the crypto market where you will see the price of a cryptocurrency fluctuating within a certain price band which means there is a lack of a clear trend to identify the levels of support and resistance. Whenever a smart Investor or trader sees such a move they take it as an opportunity to apply range trading.

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Range Trading

Based on our intro it means range trading is an investment strategy that helps us as a trader or an investor to identify a range at which we can buy and sell cryptocurrencies within a very short period.

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Let's say for example, STEEM is trading at $0.24 and you are confident that the price of STEEM will rise further to $0.28, and then you decide to trade in a range that is between $0.24 and $0.28 for over 3 days.

With this, you may decide to trade STEEM buying STEEM at $0.24 and selling it if it rises to $0.28 which you can keep on repeating the process until you feel like STEEM will no longer trade in the range between $0.24 and $0.28.

From the little example we have touched, it is now clear to us that range trading is the period that the price of a cryptocurrency or other financial assets moves within a confined or certain area, such as the area of support and resistance levels.

As we have said earlier about smart traders or investors taking advantage of the range trading strategy, they do this when they see that there is no strong trend in the market, they will buy low and sell high.

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The key features of range trading you should look at for

In identifying range trading you will need to look out for these three key features which are;

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• The Support and Resistance levels:

A well-defined support level and resistance level is what range trading is characterized by which you need to identify since it is the two levels that a barriers in the market.

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• Consolidation level:

In a consolidation level you can see a price reversal repeating itself which usually happens during the phase of consolidation, at the time the market is experiencing indecision from both buyers and sellers.

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• Volatility:

Low volatility is also characteristic and what you should identify in range trading which during range trading price fluctuation is usually low.

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The Merit and Demerit of Range Trading

"Range Trading" offers traders some advantages but on the other hand, trades are also exposed to some disadvantages such as the ones discussed below.

Merits

• With a properly established support level and resistance level as a trader or an investor you can set your stop-loss order to limit your risk of losing.

• It provides traders with a more predictable market for capitalizing price movement.

• Diverse opportunities based on the price movement of range trading traders have access to multiple opportunities in the market which is why smart traders always take advantage of the little movement of price.

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Demerits

• When using the strategy of range trading you should be careful with false breakout because it can hit your stop loss order before the price reverses back to the range.

• Due to the small movements of price you would not acquire huge profits like when you depend on trends.

The profits you will make from range trading are limited unless you can stay in the market for long

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Conclusion

_{Friend today we have learned something new again which is range trading. Note, that everything that has been discussed here is slowly for education purposes and nothing else.}

Reference