Understanding price ranges

After you’ve got a clear picture of Gann’s theory, you can then move to learn price ranges. It is evident that price plays a prominent place in trading. Therefore, every trader who is trading the financial markets must understand price ranges correctly. Without realizing it, trading the financial markets will be a tough task. So, we’ll help you know the price ranges.

The connection between price range and Range-Bound market

Some of you might get confused with the statement “price range.” The price range is the highest and lowest limit for the index for a specific trading session. It’s more like dealing with the Range-Bound market. This means the price will be capped by specific resistance and support zone. So, it is vigilant for us to get in-depth knowledge about the Range-Bound market.

Even though there are a lot of techniques explained, only a few articles deal with range bound. Sadly, Range-Bound market situations are often seen in the trading world. As you don’t have enough information out there related to the price range, which is Range-Bound, we’ll help you with that in this course.

Definition of Range-Bound market

This typically means the condition when the price overcrowding the price chart’s range. The price action will be between certain levels- low and high of the range. Some traders consider this market as a flat market, congestion phase, or price consolidation. This means if the currency pair doesn’t trend downwards or upward, it is ranging.

The resistance area is considered where there is price consolidation’s highest point. On the other hand, the support area is the range’s lower price. These areas are not fixed horizontal price, and instead, they must be treated as the zone. The horizontal channel’s low and high points will help the trader to visualize the currency pair’s current range.

These ranges will regularly appear in the market.

However, they often happen during low trading volumes. As the trading volumes are lower, the bulls and bears will not overpower one another while developing flat price action.

Check the chart below to get a clear understanding of the range-bound market on the price chart:

The classical range picture above will help you understand.

The EUR/USD is clearly trending as the volume increases. As opposed to this, the price is going sideways as the volume decreases.

Advantages and disadvantages of Currency Pairs in Range-Bound market

Even though the information is clear, you will not be able to trade currency price ranges that easily. There are pros and cons in trading price ranges, and you will have a hard time understanding the ways to trade currencies without knowing them. So let’s discuss them below.

Pros

• Specific levels to trade inner swings– when you see the range on the price chart, it shows the low and high on the horizontal channel, precisely. This movement will help you get a clear picture of price bounce in the opposing direction.
• Potential trend early entrance- when an actual breakout occurs away from the range, you can look for a price extension move. Trading the breakout will offer a considerable reward: ratio and will become a profitable opportunity when the extended breakout becomes sizeable.

Cons

• Low trading volumes– when the trading volumes aren’t sufficient, there will be tight trading ranges. This shows a weak market pressure. This emphasizes no bull or bear dominance. This kind of breakout is a suspicion.
• No general trend- as bull or bear will not overpower one another, the price chart will have a flat price action. This shows no existing trend to trade.
• Price uncertainty – the range channels have a high level of uncertainty. The reason is because of low trading volumes that can lead to whipsawing price action and false breakout.

The market range breakout

This is one of the most prominent breakouts in the flat price action. The breakthrough occurs in the lower level or upper level of the Price range.

The range breakout describes how price action tries to travel in the current price move as in the breakout direction. During this happening, you will expect the current range swing extension. Most of the time, after a high range breakout, you will witness the way price entering a new trend in the breakout direction.

The picture below shows a Market Range Breakout indicating a bullish move:

Range-Bound Currency Pairs and Price action

Many traders prefer this market, especially price action traders. They can trade this market effectively. The most straightforward reason why price action traders can trade this market effectively is because of the price range. The range is a tool or information provider for the price action traders, and they can easily find clues related to the market and trades.

If they are wise enough to spot the clues, they will be able to make use of the range. If the traders combine support and resistance within the range, they will be able to find the probability for confluent trades on the chart.  

That said, nothing is impossible if you can understand the basics of the concept. So the information will help you use price ranges effectively.