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Range Trading

Range Trading

Strategy of range trading is about to find resistance and support lines. For example to make a resistance line you can look at the historical highest prices for last year or other certain period and connect them with a straight line.

Resistance line is the highest usual price and everything what goes up more is a sell point and you will probably not get a better price anytime soon. If the price go beyond, it can mean that traders overbought and probability of the price drop is very high.

Support line is opposite of the resistance line, you can again look at the lowest prices for the certain period and draw them with a straight line. If the price goes below this line, it means the traders have oversold and that is the best time to buy.

As you can see from the bottom part of this graph, the green boxes represent peak prices and the red ones represent bottom prices. Once you find the usual top and bottom points, draw lines through them and treat everything that falls outside your two lines as a perfect buying/selling opportunity.

This tactic only works if the markets are stable and passive. If the prices are going up or down, you need a different approach, and if the prices are too volatile, using range trading might prove impossible.

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