A ceiling here, a floor below:inside the range, price to and fro.
A period in which the price moves back and forth between an area of support and an area of resistance without establishing a clear trend.
A range ends when the price leaves it, known as a breakout, although some breakouts quickly fail and the price returns inside.
In plain words
A market is in a range when its price moves back and forth between a lower area where falls have tended to stop (support) and an upper area where rises have tended to stop (resistance), without making progress in either direction. The distance between the two is the width of the range.
See it move
Moving between Resistance and Support
Why it matters
Whether a market is ranging or trending changes how its movements are read, and methods designed for one condition tend to perform poorly in the other. A range ends when the price leaves it, known as a breakout, and some breakouts quickly fail.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
Over two weeks a pair turns down three times near 1.1100 and turns up three times near 1.1000.
- 1Upper boundary1.1100. Lower boundary: 1.1000.
- 2Width1.1100 − 1.1000 = 0.0100, which is 100 pips.
- 3Midpoint(1.1100 + 1.1000) ÷ 2 = 1.1050.
The pair is described as ranging between 1.1000 and 1.1100, a range of 100 pips, until it moves and stays outside those levels.
A common mistake
The boundaries of a range are areas, not exact prices, and they hold only until they do not. Buying near the bottom and selling near the top is a known approach, but each touch of a boundary may be the one that breaks.
Check yourself
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Educational information, not investment advice or a recommendation to trade.