When a market has no clear trend, it often moves between a support and a resistance. Range trading means buying near the bottom and selling near the top, taking profit before the opposite edge.
Identifying a tradable range
- At least two touches of both the top and the bottom.
- Flat moving averages (for example the 50 EMA moving sideways).
- A range wide enough for a target of at least 1.5 times your stop.
Trading the edges
- Wait for price to reach the outer 20% of the range.
- Enter on a rejection candle back towards the middle.
- Stop just beyond the range edge.
- Target the middle of the range or just before the opposite edge.
Exit when the range breaks
Every range ends eventually. If price closes firmly beyond the edge you are trading against, close the position: the market may be starting a trend. Do not move the stop further away.