Range Trading Strategy
When using Range Trading strategy, the trader assumes that the price will not leave a certain corridor and allow the trader to receive good profit. This strategy with simple rules is highly effective. The only prerequisite for its successful application is the price moving sideways, i. e. in the range.
How to Use Range Trading Strategy
Before applying the strategy, the trader needs to plot on the chart the boundaries, within which, in the trader’s opinion, the price will stay over a certain period of time. The upper and lower boundaries of the channel, within which the price will be moving, are not necessarily parallel to each other. Trading ranges can also form a triangle or another simple pattern.
Unlike other strategies, here the trader can trade in the range without waiting for the pattern to form completely.
After determining the upper and lower boundaries, the trader can start trading. When the price is coming close to the lower boundary, you should buy a Call option. If you see that the price is approaching the upper boundary, it is reasonable to buy a Put option.
Bear in mind that any range can experience a breakout at any time. After the price breaks one of the boundaries, the trend usually continues in the exact same direction as before.
The price breakout can be spurred by releases of important economic or political news or statistics from central banks. In other words, Range Trading strategy proves most profitable when the market is quiet and sharp price movements are unlikely.
You can easily identify ranging periods by using an economic calendar. Half an hour prior to the release of economic news, switch from using Range Trading strategy to some other binary options trading system.
To make the trading signals generated by the Range Trading strategy more accurate, you can combine it with some indicators –Volume Indicator, for example.