Forex Charts for Range Bound Traders

Posted by admin 28/10/2013 Comments are off 871 views

Range-bound Forex Charts

This article looks at the use of forex charts by range bound traders.

There are many traders who find that working with range trading is the best option for them.  Range bound trading is a purely technical trading strategy.  This means that you are only going to be using the forex charts to determine when and what you should be trading.  You will also only be working in range bound markets.  It is important that you understand how to determine the range on the forex charts and how you are going to be trading.

Identifying the Range on the Forex Charts

There are a number of ways that you can determine the range with forex charts.  The best way to do this is to use the support and resistance levels.  These levels will create a channel on the forex charts that shows you the range that the currency pair is moving in.  The levels will look at the average highs and lows of the movement to form the channel.

It is also possible to use trend lines when you are looking at the range.  The trend lines will also look at the highs and lows of the market movement.  These lines will offer you channel that you are going to be trading in.

The Common Strategy

When you complete range bound trading you are going to find a number of different strategies that you can use.  There are some strategies that are more common than others.  The most common one is the trade on the movements until they come close to the support and resistance levels.  When the movement is close to these levels you are going to close the trade.

This means that if the movement is moving upward then you are going to trade on this movement.  Once the movement comes close to the upper line of the channel you are going to close the trade.  Once the movement has bounced off the line and starts to move downward you are going to trade accordingly.

The Pitfalls of Range Bound Trading

There are some pitfalls that come with range bound trading.  The first is that you will not always be able to find a range with the currency pair that you are trading.  While there are some currency pairs that range more than they trend there will be times when they are not ranging.  This means that you are going to have to change currency pairs or change the trading strategy that you are using.

Another pitfall comes with the fact that range bound traders are subject to breakouts.  Breakouts occur when the currency pair price movement breakouts of the channel that it was moving in.  There are some traders who will trade on the breakout and there are others who will not.

If you are going to trade on the breakout as well as the range you have to know about the problems that come with breakout trading.  The primary problem is that the breakout can fail and this will cause a loss if you do not react quickly enough.  There are also a number of other issues that you will need to be aware of before you trade in this manner.



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