Skip to content
GetProfitable
Search
Dictionary

Trading range

A stretch of chart where price oscillates between a rough ceiling and floor without establishing a trend in either direction.

A range beside a trendOne chart swinging between a flat floor and ceiling, another stepping upwards inside a pair of sloping lines.Range-boundresistancesupportprice bounces between two levelsTrendingthe trend channelhigher highs and higher lowsA range has two flat edges; a trend has two sloping ones.
Range versus trend. On the left price keeps bouncing between the same floor and ceiling, which is a range. On the right each high and each low is higher than the last, inside a pair of sloping lines called a channel.

A range has a top, a bottom, and no reliable structure between them. Markets spend a large share of their time this way, which is why trend-following tools produce so many losing signals: a moving-average-crossover in a range flips back and forth and produces whipsaw.

Ranges are traded by fading the extremes with stops just outside, or by waiting for the range to break. The two approaches are incompatible on the same chart at the same time, so pick one and know which regime you think you are in.

The hard part is that you only know a range has ended after the breakout, and roughly half of apparent breakouts fail back into the range. Tools like adx and choppiness-index try to classify regime numerically, but they are lagging too.

Related: consolidation, range, false-breakout, adx, choppiness-index

Educational only, not advice. Spotted an error? Post in Site Feedback.