We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
GBP/USD
Bullish
USD/JPY
Bullish
Gold
Bullish
Oil - US Crude
Bullish
Bitcoin
Mixed
More View more
Real Time News
  • #DAX: Currently the market is trying to push beyond the reversal-day high, but if it does the December t-line and a minor swing-high from July 2018 stand in a way of a further advance. Get your DAX technical analysis from @PaulRobinsonFX here: https://t.co/1Yus7TddGo https://t.co/jiwN6z3TFB
  • #AUD and #NZD are modestly lower while #CHF and #JPY are modestly higher, suggesting market sentiment is favoring a risk-off tilt
  • The British Pound may be at risk of losing upside momentum against the US Dollar and Japanese Yen as #Brexit limbo fuels a shift in $GBPUSD and $GBPJPY contrarian trading outlooks. Get your market update from @ddubrovskyFX here: https://t.co/hHcAFEzO3X https://t.co/24vKxDohDI
  • Japan MOFA: Japan’s PM Shinzo Abe told South Korea’s PM Lee that relations are in a very severe state, must not be left in this state. -BBG
  • Global macro data have long flagged the impact of #USChinatrade tensions, increasingly the corporate numbers are doing the same as #earningsseason shows. https://www.dailyfx.com/forex/market_alert/2019/10/24/Caterpillars-Asia-Warning-Shows-US-China-Trade-War-Now-BitesDeep.html?utm_source=Twitter&utm_medium=Cottle&utm_campaign=twr #Caterpillar #Ford #Dollar #AUDJPY
  • (Technical Outlook) US Dollar Forecast: USD/SGD, USD/IDR Nearing Trend-Defining Support #USD $USDSGD $USDIDR - https://www.dailyfx.com/forex/technical/article/special_report/2019/10/24/US-Dollar-Forecast-USDSGD-USDIDR-Nearing-Trend-Defining-Support.html?CHID=9&QPID=917702 https://t.co/QKRUwqLZlS
  • Recent $USD weakness may give way to the next leg in an almost two-year uptrend as markets stockpile cash despite the Fed’s interest rate cut cycle.Get your market update from @IlyaSpivak here: https://t.co/CSvCbTCDxc https://t.co/Q6N9JMtH7J
  • Commodities Update: As of 02:00, these are your best and worst performers based on the London trading schedule: Gold: 0.09% Silver: 0.07% Oil - US Crude: -0.76% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/2aMDvFlQxf
  • Over the past 30 days, #PLN, #HUF and the #CZK have been the best performing EMEA currencies vs. USD with +3.58%, 2.82% and 2.09% spot returns.
  • Forex Update: As of 02:00, these are your best and worst performers based on the London trading schedule: 🇪🇺EUR: 0.08% 🇯🇵JPY: 0.08% 🇬🇧GBP: 0.08% 🇦🇺AUD: 0.00% 🇨🇦CAD: -0.02% 🇳🇿NZD: -0.06% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/CgxEYwIJwg
A Simple Strategy For Ranging Markets

A Simple Strategy For Ranging Markets

2013-11-15 03:00:00
Walker England, Forex Trading Instructor
Share:

Talking Points:

  • Traders should have a plan of action, when Forex trends end.
  • Identify trading ranges by pinpointing swing highs and lows.
  • Oscillators such as RSI can use overbought and oversold levels for market entries.

One rule that should be followed by every trader is to find a trading plan and stick with it. However, any experienced trader knows that they must remain flexible because the market isn’t always trending and moving in a singular direction! So what is a trader to do when some of the Forex markets most frequently traded pairs don’t have an established trend?

The answer itself is quite simple. When the market gives you a range, trade ranges! When markets are moving sideways, it can be easy to adapt one of your trending market strategies to present conditions. Often trending market traders will look to use indicators such as CCI, RSI, or MACD in conjuncture with support and resistance lines to trade market swings. The same philosophy can be used while range trading if you know what to look for.

Learn Forex – EURCHF Daily Range

A_Simple_Strategy_For_Ranging_Markets_body_Picture_1.png, A Simple Strategy For Ranging Markets

(Created using FXCM’s Marketscope 2.0 charts)

Above we can see the EURCHF currency pair which has been locked in a trading range since the month of June. The range itself can be identified by moving from left to right on your chart and marking a series swing highs and swing lows. If price appears to be moving in a horizontal line you have probably identified a trading range. Any easy litmus test for a range is to determine if prices are heading higher or lower on your chart. If you find yourself debating if a chart is trending up or down, odds are your graph is trading in a range!

Now that a range has been identified, let’s look at a plan for trading the market.

Learn Forex – EURCHF RSI Signals

A_Simple_Strategy_For_Ranging_Markets_body_Picture_3.png, A Simple Strategy For Ranging Markets

(Created using FXCM’s Marketscope 2.0 charts)

Above, we can now see an 8Hour EURCHF chart in conjuncture with the RSI (Relative Strength Index) indicator. When trading a range, traders can look to use RSI's overbought and oversold levels to determine where to enter the market. Unlike trend traders, range traders do have the ability to trade both sides of the market. This means range traders will look for both buying and selling opportunities.

To sell range traders can trigger orders when price moves off resistance and RSI crosses back below a reading of 70. As momentum returns price lower, traders can focus their targets near the support zone. Price moving towards support will also allow traders to initiate new buy positions. Traders will look to buy in a range as price bounces off support and RSI moves back over an RSI reading of 30. Pricing targets for buy orders will then focus on levels near resistance.

While the EURCHF is not currently trading at support or resistance, traders will wait patiently for the next decline or advance before entering into the market.

Managing Risk

Every strategy needs to have a plan for managing risk. Just like trends, ranges can abruptly come to an end and traders need to be prepared for that scenario. When trading ranges, stops should be kept out of the identified levels of support and resistance. If the event that price breaks above resistance or declines bellow support, the range should be considered invalidated. At that point, range traders should exit any existing positions and look for other trading options.

---Written by Walker England, Trading Instructor

To contact Walker, email instructor@dailyfx.com. Follow me on Twitter @WEnglandFX.

To be added to Walker’s e-mail distribution list, CLICK HERE and enter in your email information.

Want to learn more about trading RSI? Take our free RSI training course and learn new ways to trade with this versatile oscillator.Register HERE to start learning your next RSI strategy!

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.