Best Range Trading Strategy

Best Range Trading Strategy – By | Last updated June 14, 2021 | All Strategies, Forex Strategies, Indicator Strategies | 6 comments

Learn the best range trading strategy to avoid getting chopped in a varying market. Markets spend most of their time in range zones, so you need to have a trading process that includes range trading. In this guide, you will learn a new concept of range bars and the art of trading a choppy market with the Bar Range Indicator MT4.

Best Range Trading Strategy

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It is a known fact that any type of market (stocks, commodities, Forex currencies and cryptocurrencies) only trend 20% of the time.

The market spends most of its time transitioning from trading ranges through retracements and other counter-trend actions.

The 80/20 rule, also known as the Pareto principle, states that 20% of the input will produce 80% of the results (output). We can see how the 80/20 principle can explain market behavior. The 80/20 can also be seen in countless other cases in markets and business.

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In the future, we will spend some time introducing the concept of range bar charts and why some traders focus on range bar trading strategies.

This is a quick beginner’s guide to range trading. By taking the time to understand range trading, you can develop a more effective trading strategy. Range trading strategies can be used in any market under almost any type of market condition.

As the name suggests, range trading is a strategy or technique used to trade a range-bound market.

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A trading range occurs when a financial instrument (stocks, indices, bonds, commodities, Forex currencies or cryptocurrencies) fluctuates between two upward and downward limits for a period of time.

In other words, we want to buy at the lower end of the range. Conversely, we want to sell at the top of the range.

Alternatively, more experienced traders can look for breakouts in the trading range. This type of trading strategy can give you quick profits as we trade on strong momentum.

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Traders can spot time-range-based items by looking for clues that the support and resistance level is holding. In a range market environment, the overbought and oversold indicators work best to time the range-based entry.

It really depends on your trading goals and your personality. The trading strategy that is right for one trader may not be the best for another.

However, you still need to have the right tools to deal with the inherent risk of trading online.

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Most traders are only familiar with bar chart or candlestick chart trading, which plays a role in the time element. If you want to upgrade your style and learn new trading tools and techniques, we’ve got you covered.

Range bars are a convenient replacement for the most popular types of charts (bar chart, line chart, and candlestick chart). Range bars are used in technical analysis in the same way as any other form of charting technique.

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For example, with a time-based chart, each 5-minute bar shows the price activity for each 5-minute period. These time based charts will always print the same number of bars during each trading session regardless of volatility, volume or any other factor

In other words, the range bar does not close at a specific time, but only when a range is completed.

For example, if you selected a range of 100 pips, each of these range bars will be equal to that range. So each of these range bars is equal to 100 pips.

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To use a profitable Renko strategy you really need to understand the basics of a Renko block. See here: Profitable Renko Strategy – Build your account, one brick at a time.

Both Range bars and Renko bars remove the time element to focus on price, isolating the trend.

The Renko box is only printed on the card if the price moves in one direction from the opening price of the previous tile.

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Both range bars and Renko bars serve their own technical purposes. You can consider using both types of bars when trading.

For example, if you select a 100 pips range bar and the EUR/USD exchange rate moves from 1.1100 to 1.1180, then from 1.1180 to 1.1100, then from 1.1100 to 1.1180 over a 3-day period, you get this:

Basically, you get a bar that goes from 1.1100 to 1.1180 over a period of 3 days and this bar is not closed yet.

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In this case, the range bar will be closed and a new bar will be printed with the opening price at 1,1200. This new bar should have a range of 100 pips to close.

Now knowing how the range bar came to life will give you a much deeper understanding of this range indicator.

In 1995, Vicente M. Nicolellis Jr., a trader from Brazil, developed an innovative technique for mapping price bars. The innovation of range bars came as a solution to address the high volatility in its local markets in Sao Paulo.

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Trading with range bars works best when we have periods of congestion or price consolidation zones. Using range bars, we eliminate much of the daily market noise by smoothing out the price action.

Time-based charts will always post the same number of bars during each trading session, regardless of volume, volatility or other factors.

The only time you will see more range bars on the charts is when we have periods of higher volatility.

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The main advantage of a range bar chart is that by eliminating the time factor, range bars become very effective when used in conjunction with other technical indicators such as oscillators.

Learn more about the different types of oscillator indicators here: Best Forex Indicators to Generate Buy and Sell Signals.

Now that you are familiar with calculating range bars and the benefits behind the MT4 Range Bar indicator, let’s develop a range trading strategy.

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Note * For this range bar strategy we use a range bar size of 5 pips. This means that every bar will print once we have traveled at least 5 pips in one direction or the other.

Once the resistance level is tagged by the range bar, we wait for price formation with 3 counter trend bars.

The protective stop-loss order can be safely placed above the 3 range bar pattern. Stop losses are one of the most effective ways for traders to manage their exposure to risk.

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For more information on how to use the Money Flow Index check: Money Flow Index – Act like the banks. Through this range bar trading strategy, we are going to use the MFI indicator to confirm the buy and sell pressure behind the range bar extension.

For example, if the range bar goes up, we want to make sure it’s due to buying activity.

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If you are tired of finding success with the traditional candlestick price chart, you will find some value in doing some research and backtesting the range bar. If you are looking for a more comprehensive trading strategy with an effective tool to time your entry and exit points, you are much better off using the Bar Range Indicator MT4.

With the best range trading strategy, you have the opportunity to see the market structure a little more clearly. If the market is not moving, there are no trading opportunities. If there are no trading opportunities, we cannot make money. The range bar helps us identify when a trading opportunity arises.

With over 50+ years of combined trading experience, Trading Strategy Guides provides trading guides and resources to educate traders of all walks of life and motivations. We specialize in teaching traders of all levels how to trade stocks, options, forex, cryptocurrencies, commodities and more. We provide content for over 100,000 active followers and over 2,500 members. Our mission is to address the lack of good information for market traders and simplify trading education by providing readers with a detailed plan with step-by-step rules to follow.

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We look at range trading and how it can be used to provide opportunities when a market is not showing a clear trend in a particular direction.

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Markets only trend about 30% of the time. This fact poses a problem for traders looking to capture b moves. The rest

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