Range trading
When price moves sideways, buy near the bottom and sell near the top. Step aside when it breaks.
What it is
A range is a sideways market bounded by support and resistance. Inside it, mean-reversion works: buy near the lower boundary, sell near the upper boundary, and target the middle or the opposite side.
The risk is the breakout. A range ends when price closes beyond a boundary with volume. Your stop must sit outside the range so a normal poke does not take you out, but a real break does.
How to use it
- Define the range from at least two touches on each side.
- Trade only the outer 25% of the range.
- Use rejection candles as triggers.
- Stop outside the range; stop trading it after a confirmed break.
Common mistakes
- Trading the middle of the range.
- Adding to a loser as price nears the boundary.
- Assuming the range lasts forever.
Practise it in TradeDesk X
Bollinger bands, VWAP bands and the volume-profile value area on the TradeDesk X chart show typical range extremes.
Related lessons
Inside bar breakout
A candle inside the previous candle’s range marks a pause. The break shows the next direction.
📊VWAP (volume-weighted average price)
The average price paid today. Institutions benchmark to it; price tends to return to it.