Range
Definition
A range (or trading range) is a price zone where a stock oscillates between a defined support floor and resistance ceiling without making meaningful new highs or lows — price is consolidating rather than trending, and the dominant trade is buying support and selling resistance rather than following a directional move.
Example
“The stock had been bouncing between $19.50 and $21.20 for three weeks with no sustained move above or below. I bought at $19.65 with a stop at $19.30 and sold at $20.90. Same trade four times in a row.”
Detailed Explanation
Ranges develop for a reason: buyers and sellers are in equilibrium at a certain price zone. At the support end, buyers consistently find value and step in to buy. At the resistance end, sellers consistently find the price attractive enough to take profits or initiate shorts. This push-and-pull is visible on the chart as repeated touches of the same levels without decisive breakouts. The longer and more clearly defined the range, the more significant the eventual break — because the level has been tested and held multiple times, the supply and demand imbalance that finally breaks it must be substantial.
Range trading (buying support, selling resistance) works well in low-catalyst, low-volatility environments. The risk is clear: you're wrong if price breaks decisively through your entry level with volume. Risk management in a range trade means setting stops just outside the range boundaries — if you're buying at support, your stop goes just below the support level. If support breaks, the range has ended and you want no part of holding a long into a potential breakdown. The same applies in reverse for shorts at resistance.
The most important skill with ranges is recognizing when the range is ending. The warning signs: volume expanding on one side (buyers or sellers becoming more aggressive), price making progressively smaller bounces off the opposite boundary (losing momentum), consolidation tightening within the range (compression before expansion), or a fundamental catalyst entering the picture. A breakout from a well-established range on high volume is one of the highest-probability setups in technical trading — the range was the coiled spring, and the breakout is the release. Identifying the range before the breakout lets you position for the move at minimal risk.