Range Trading
Definition
Range trading is a strategy that buys near the floor and sells near the ceiling of a sideways price range, betting that price keeps rotating between the two edges instead of breaking out.
Example
“XYZ had rotated between 49.20 and 50.40 four times, so the trader switched to range trading and waited for the next test of the floor.”
Detailed Explanation
A tradable range needs at least two clear touches of each edge, roughly flat swing highs and lows, and enough distance between the edges to pay for a stop and costs. Range traders enter at the edges, place the stop just beyond the edge, and target the middle or the opposite side. The middle of the range is a no-trade zone because the reward is too small for the risk.
The edge of the strategy depends entirely on the market staying sideways. When a range breaks, a fade at the edge turns into a trade against a new trend, so range traders keep stops tight, avoid adding to losers and often trade smaller near scheduled news. Range trading pairs naturally with breakout trading: the same levels serve both, and the regime decides which one to use.
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