FOREX Range Strategy

In FOREX trading, range trading is a popular strategy where traders seek FOREX pairs that are trading within a narrow price range when compared with their historical volatility. The range will consist of a lower and upper price level.

Buying

Using a range strategy, traders buy when the FOREX pair is near the lower section of its range. They will than hold onto the position until it moves higher toward the upper band of the range, and than sell for a profit. Or, they will sell for a loss if the trading instrument drops below the lower band of the range.

Shorting

Using the range strategy, traders short the FOREX pair when it is near the upper prices of its range. The position is held until it drops toward the lower level of the range and than exited for a profit. If the trading instrument trades above the upper band of the range, the position will be closed for a loss.

Order Types

Positions can be created with either a market or limit order. A market order is an order to buy/sell at the current price, while a limit order is an order to initiate the position at a price different than the current price.

Ideal Trading Environment

The optimal trading environment for range trading is during periods of low trading volatility, such as the days before a key economic release when traders are on the sidelines waiting for the news.

References

• DailyFx: Identifying a Range