A market condition where the price oscillates between a defined support floor and resistance ceiling without establishing a clear trend direction.
What Is a Range?
A range (or ranging market) occurs when the price bounces between a horizontal Support level and a horizontal Resistance level without breaking through either side. Unlike a Trend, there is no clear directional bias. The market moves sideways.
On USD/JPY, if the price bounces between 147.50 and 149.00 for three weeks, that is a range. Buyers consistently appear near 147.50, and sellers near 149.00.
Range Trading Strategies
The straightforward approach is to buy near the range bottom and sell near the range top. Look for reversal candles at each boundary: a Hammer or Bullish Engulfing at support for a long, or a Shooting Star or Bearish Engulfing at resistance for a short.
Stops go just outside the range boundary. The target is the opposite boundary. The risk-reward depends on the range width relative to the stop distance.
Range Breakouts
Ranges do not last forever. Eventually, one side wins and price breaks out. The longer a range persists, the more significant the eventual Breakout tends to be. Watch for signs that a breakout is approaching: narrowing range width, volume surges, or candlestick patterns that show one side gaining strength.
Many traders lose money in ranges by applying trend-following strategies. Recognizing that the market is ranging early allows you to switch to a mean-reversion approach or simply step aside until a trend develops.
Related Terms
Consolidation
A period where the price moves sideways within a defined range after a trending move, as the market pauses before the next directional move.
Support
A price level where buying interest is strong enough to prevent further decline. The price tends to bounce upward when it reaches support.
Resistance
A price level where selling interest is strong enough to prevent further advance. The price tends to reverse downward when it reaches resistance.
Rectangle
A continuation or reversal pattern where price bounces between horizontal support and resistance lines, forming a box shape. The breakout direction determines the signal.
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