A range is a market bound between support and resistance, displaying no discernible trend. One of the main reasons traders will seek out ranges is consistency. Learn more about range trading here.
To be sure, we can line out a litany of different backdrops that traders might find. But, if we reduce price movements to their lowest common denominator, there’s really only two things that a market can be doing, right?are making fresh higher-highs and higher-lows we have an uptrend. If they’re making lower-lows and lower-highs, we have a down-trend. If it’s doing neither, we don’t have any trend at all.
However, in practice this is misleading; because most of the trendless states that you’ll find in markets won’t have a lot of symmetry, and sometimes they’re just straight up messy. So first things first, let’s define a range.A range is a market bound between support and resistance, displaying no discernible trend, which is then prone to mean reversion.
In our prior article on the Average Directional Index, or ADX, we looked at an indicator with the sole purpose of denoting trend strength. The benefit of such an indicator is that it’s not trying to do many things at once, it’s solely an indication of, ranges can then be defined as environments in which ADX reads below the value of 20.
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