Once market investors have started to look at the foreign exchange environment as a platform for new investments, it is a good idea to start researching some of the strategic approaches that are taken by successful traders with experience. Market research reports here have been issued by FiboGroup, which offers broker forex trading with a wide library of research and educational materials.
Some of the terms that you will likely hear discussed under this topic include phrases like trend trading, contrarian trading, and range trading. All of these strategies require a certain type of environment to be present in order to generate returns. Here, we will look at some of the ways range trading allows traders to capture profits in the forex markets.
Trading from Support and Resistance Zones
The first part of the process when range trading is to identify support and resistance zones. These are price areas where the market has previously found buyers (support) or sellers (resistance) when looking at the chart history. When we outline these areas on a chart history, the result is a visual “range” that prices will be expected to maintain for as long as the current trend is in place.
This is why range trading strategies tend to work best when there is stalling momentum visible in the market. There will always be periods of indecision that exist between the bullish and bearish price movements that are visible in the market. When this occurs, there is neither a true majority or minority influence visible in the market, so prices tend to move sideways.
This sort of falls in the face of what many traders often suggest, which is that markets can only travel in two directions: up and down. But when we look at things on a trend basis (rather than on a price bar to price bar basis), we can see that sideways price moves play a major part on any price history.
So when you are looking for new strategies to use when there is not a clear bullish or bearish trend that is present in the market, range trading strategies will likely be the best solution — and even allow you to profit when there is no dominant momentum to create significant volatility.