What is Range Trading?
Range trading is a strategy where traders buy near support and sell near resistance within a horizontal price channel, profiting from repeated price oscillations between established boundaries.
Range Trading Explained
Range trading works best in markets without a clear trend. The strategy is straightforward: buy at support with a stop below, sell at resistance. The risk is that ranges eventually break — either into a new trend or a false breakout. Range traders must be ready to adapt when the range fails. Volume typically declines within the range and increases during breakouts.
Real-World Example
A stock has bounced between $40 and $50 for two months. A range trader buys at $42 with a stop at $38 and sells at $48. They repeat this trade three times over six weeks, capturing $6 per share each time ($18 total) before the stock eventually breaks above $50 on high volume.
Related Terms
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