Very more than often markets lack particular direction and where trendiness refuses to behave properly. There may be occasional breakout points, and possibilities of false breakpoints also come to the scene. With risk absorbing and correct usage of technicalities, traders can successfully battle it out thanks to ranging market Forex mechanisms. It also helps manage risks with ease.
In order to find a range, one needs to correctly predict support and resistance levels. To do this, connect the candlesticks crests and troughs until you find horizontal parallel lines. This band thus formed is the range within which market mechanisms act. The uppermost limit of a range is resistance while the lowermost limit is its support.
Timing your entry into trading using range Forex:
Entering onto potentially viable trading range involves the use of oscillators. Consider the value o1f RSI between 70 and 100. It implies that market is moving towards a bullish situation. This indicates that traders should consider buying their specific lots of currencies. However, a value of 30 and below indicates potential selling points.
Remember that it is only when markets lack general trending (oscillatory) that it follows a range. With this oscillatory movement, it creates identical highs and lows. If you intend to ride a trend, make sure that you make an approximate estimate of the overall movement.
Ways to tackle sideways ranging markets – a special case:
Markets do not always move upwards or downwards with a slope. Sometimes they continue moving sideways. This indicates that market reaches a stagnation point and it might hint steeper fluctuations beyond this. 4 steps to follow while trading ranges
1. Determining market conditions:
If sideway markets are bounded by ranges on both sides, traders find it profitable to trade. This means that there should be sufficient number of support and resistance levels. For trading ranging market Forex, zoom into price chart and look for sharper bends with sufficient spaces between support and resistance levels.
2. Shifting and tighter ranges:
To order to enable fair distance between support and resistance levels, one should calculate notice the condition of reversals. Traders need time and experience to understand the nature if market if its range bound.
3. Preserving your capital:
Estimating the correct range of price movements is essential in order to get a better grip of your next best move. So if the market is not showing any specific directional flow, consider squaring your position. Traders should look for perfectly ranging markets to trade with to safeguard their investments.
4. Trading ranging Forex market sideways using false breakouts:
Amidst trending markets, breakouts often create problems; although some regard it as potential entry zones into the market. In order to increase your chance so profiting, use false breakout mechanism. If there is at least one false break, move in that direction to the other end of the range.
‘Often the best position to trade is no position at all.’ Look for potential reversals, breakouts and other loopholes that might pave the way for trading currencies. Also, try trading with ranging market Forex and opt for the best position to trade with.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.