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Range Trading

Written by Martin Grippen. Visit also my Google Plus site ,Facebook site and my blog about Forex.

In Forex trading is it essential to have a plan or a strategy. It is a description of how to trade. Some of the subjects a plan contains are a trading strategy, Stop/Loss level and a take profit level. 

Trading strategy

A trading strategy is how to trade. 

Some trade with indicators as the Bollinger Bands, Stochastic, Williams %RLinear Regression and Parabolic SAR

Others trade a lot of short trades during the day. They use a system as a trading strategy. They look at the chart and buy and sell if the chart move as the system describe. The strategy is called Scalping and is described in the article "What is Scalping?

There are a lot of strategies the trader can use in trading Forex. In this article is the mindset on Rang Trading; the strategy will be explained later in this article as the terms Stop/Loss level and Take profit level first will be described. 

Stop/Loss level

A Stop/Loss level is a level where the trader stops the trade if the trade goes in the wrong direction. 

Take profit level 

The take profit level is the level where the traders take the profit in a trade. 

Range Trading

Range Trading is trading in a range.

The trader selects the currency pair he wants to trade in; look at the price pattern in the chart. He wants to find patterns like the one on the image; a zigzag pattern where the price goes up and down. 

The trader sets the Stop/Loss level and Take profit level; the Stop/Loss level is set by choosing the lowest price in the range.  If the trader finds the Stop/Loss level as the right level he will choose the level. If he thinks the level fit better higher on the chart he will move the level a bit higher on the chart. The Take profit level is chosen as the Stop/Loss just between the highest prices.  

The Stop/Loss level and Take profit level are called channels. The price between the two channels is the median; the median indicates if the market is bullish or bearish. A bullish market is a market that is moving upwards; a bearish market is a market that is moving downwards.  The channels could be considered as the standard deviations used in the Bollinger Bands or the over-bought and oversold situation in the stochastic indicator.

How to trade in a range

The trader enters a trade when the price is near the Stop/Loss level. It is the same strategy as when the trader trades with indicators for example the Bollinger Bands or Linear Regression etc. The indicator crosses the price line and the price starts to increase; in range trading is it when the price line crosses the lower channel and starts to rise.   

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Disclaimer
Trading CFDS in Forex, stocks, indices, ETFS and commodities has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to your investment in the CFDS in Forex, stocks, indices, ETFS and commodities market. Don't trade with money you can't afford to lose. Your success depends on your background, dedication, desire and motivation. Content on this website is for illustrative purposes only. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.