Learn What is ranging market with example. The range is referred to as a difference between the low and high prices for a security over a specific time. The range is given on the chart for a single trading period. The marking is like high and low points on a candlestick /bar. The range also called the difference between the high and low prices in a given trading period. The range-bound is separated by prices in a definable range at a time. Then the amount of change in range is compared to the overall price that depicts the level of volatility in a particular security. A technical analyst will follow a range pinpointing the entry and exit point of the trader. The investors and traders give a range of trading periods. Securities that trade within a definable range are influenced by market participants attempting to exercise range-bound trading strategies. The amount of volatility varies from one asset to another and from security to another. So investors prefer lower volatility as prices becoming more volatile to indicate turmoil in the market.
Here price volatility is equivalent to the risk. The security trading range has a good indicator risk. The conservative investor preferred security with smaller price fluctuations compared to securities susceptible to significant gyrations. Investors are preferred to invest in stable sectors like utilities, and telecommunications than financials, technology, and commodities. High-beta sectors have a wide range than low-beta sectors.
Range Support and Resistance : A security trading range highlights the support and resistance levels. The bottom of the stock range from $10 as a number of occasions will span for a month. This is considered an area of strong support. If the stock breaks below that level traders interpreted it as a bearish signal. So breakout above a price is marked at top of the range on a number of occasions considered a breach of resistance.
view moreA range-bound will have a price bounce in between a specific high price and a low price. The high price acts like a resistance level in which price cannot break. The low price support level is where we cannot break. It is called a choppy market /being choppy.
Bollinger Bands contract as there is less volatility in the market. It will expand when there is more volatility. Due to this Bollinger Bands will provide a good tool for breakout strategies. When the bands are thin and contracted the volatility is low. There must be some movement of price in one direction. When bands start to expand the volatility is increasing and the movement of the price goes in one direction. The range trading contains narrow bands then compared to wideband to form horizontally. Here buying a low-price forex trader is the process of hoping for profit around the high price. The selling near the high price trader means hoping to take profit at a low price.
While trading a pair trending/ranging environment take comfort in knowing that you can profit whatever the case may be. Here we can find out how to pick the top and bottoms in both trending and ranging market.
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