RANGE TRADING
Overview
Buy at support and sell at resistance within a defined trading range. When a market lacks a clear trend, it oscillates between price boundaries — range traders exploit this predictable behavior instead of fighting it.
Setup
- 1.Identify a clearly defined horizontal range: the market must have tested both the high and low at least twice.
- 2.Wait for price to reach the boundary zone — don't chase it into the middle of the range.
- 3.Enter near support (buy) or resistance (sell), with a stop just outside the range boundary.
- 4.Target the opposite boundary as your profit objective — don't get greedy inside the range.
- 5.Abandon the trade immediately if price closes convincingly outside the range (breakout/breakdown).
Max profit
The width of the range, captured from one boundary to the other.
Max loss
Defined by stop-loss just outside the range boundary (typically 1-2 ATR beyond the level).
Breakeven
Entry price plus commissions.
When to use
In consolidating markets between significant events (between FOMC meetings, seasonal lull periods). Natural gas and crude oil frequently range-trade outside of extreme weather and geopolitical events.
When to avoid
When a strong fundamental catalyst is approaching (WASDE, FOMC, geopolitical event) that could break the range. When range boundaries have been tested many times — each retest weakens the level.