A unique strategy for trading on a range-bound market
This article explains how support and resistance levels, along with stochastic extremes, are generally understood to indicate price behaviour in a range-bound market.
Timeframe: all
Currency pairs: cross pairs
Market state: range-bound
Range-bound, or sideways, conditions can occur with any currency pair, but they are particularly common in cross pairs such as AUDNZD, GBPCAD, and EURGBP—periods when the price lacks a clear trend and moves between two extremes instead.
In a range-bound market, traders commonly identify a support level (where price tends to stop falling) and a resistance level (where price tends to stop rising), and measure the distance between the two.
Required indicators:
- There are no specific indicators required. However, Bollinger Bands are commonly used to help identify a range-bound market, and Stochastic (21, 1, 3) is sometimes used as an auxiliary indicator alongside support and resistance levels.
Possible short position entry
1. Price trades near the resistance line.
2. The stochastic reads above 70.
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This combination might signal that the price is approaching the upper edge of the range.
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Possible long position entry
1. Price trades near the support line.
2. The stochastic reads below 30.
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This combination might signal that the price is approaching the lower end of the range.
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