A Strategy for Range-Bound Pairs

Focus: FOREX

James Stanley Image James Stanley Trading Instructor, DailyFX Education

One of the most beneficial, yet most neglected, market conditions by new traders is the range-bound market. James Stanley of DailyFX.com walks through how traders can look to take advantage of markets confined by support and resistance.

As traders, we almost can’t help ourselves….

Fast markets draw us in, almost as if there was a sign offering ‘free money’ to all those willing to take on the risk. It’s unfortunate, but in many cases—these are not the optimal market conditions for traders to be speculating in.

In the DailyFX traits of successful traders research, we found that the best time of the day to trade forex is the Asian session trading period; and the primary reason is because markets during this period of the day have a tendency to range.

The higher degree of respect for support and resistance, coupled with the generally slower moving prices proved to be much more amenable for traders than the fast and active markets commonly featured during the London or US sessions.

While ranges may not offer the same pulse-pounding potential to rack up hundreds or thousands of pips on a single trade, they are more than adequate for the pursuit of most traders’ goals. In this article, we’re going to look at the recent range put in EUR/USD, as well as how we can look to analyze and trade in such market environments.

The Technical Setup of the Range
Traders can use past market information to discern which prices have been seen as so cheap that traders rush in to buy, or prices so expensive that traders are compelled to sell.

This is the true establishment of a range: Prices are bound by an upper and lower area of prices that greatly change the order flow of that given asset.