Range trading is a typical Forex Trading strategy which deals with lower volatility sideways movements. This trading strategy is not that great with all kind of currency pairs, as it allows to stick to interrelated currencies. The most common currency pair for this strategy option is EUR/CHF.
If you have a look at the typical charts, you will notice the support and resistance lines. Those are usually marked with corresponding colors. For each pair there’s a time when the currency values return back to some sort of mid-point. This is the ideal chance for the range traders. They usually buy at the lowest point and sell it at the high ones. And this process is being repeated a few times, instead of changing the trading pair.
The first step in range trading is choosing the right currency. The decision should stop at the pair which claims to have a low interest rate. Another basis for the choice maybe the connection between the currency markets. As such European and Swiss currencies sound to be an ideal pair as their markets are strongly connected not only within the physical distance but also the connectivity of overall trading. In contrast, EUR/USD do not fit into the deal, as they are being used more within competing markets.
After the currency choice you should have a look at the charts and graphs showing the lows and ups of the currencies. Here you might apply for the support from your forex broker. They will explain you how to use pivot points, Bollinger Bands and Fibonacci levels. Follow their patterns you will be able to make a decision about your chance of entering the market.
Then you should think of choosing the limits for the trade. If you’re a long positioning then the most optimal choice is to set the limit close to the resistance level, while the stop should be a few pips lower than the swing low. This is for the chance if the market goes in your favor. In case of short positioning you should make limits close to the bottom and stops above the swing high.
