Profit from oscillating prices between well-defined support and resistance.
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Overview
Range trading is a strategy that profits when an asset's price oscillates back and forth within a well-defined horizontal channel. It is most effective when the broader market is in a consolidation phase β after a significant move, when price digests by trading sideways between a support floor and a resistance ceiling.
Identifying a valid range requires the price to have touched support and resistance at least twice each, with the touches being relatively equal (not a series of declining highs or rising lows, which would indicate a trend). The range should be wide enough relative to transaction costs to allow profitable trades β typically at least 2β3% between support and resistance in crypto and 0.5β1% in liquid forex pairs.
The standard entry is to buy near support and sell near resistance. Confirmation techniques include: waiting for a bounce candle (a rejection wick or engulfing pattern at the level), requiring RSI to be oversold at support (below 40) and overbought at resistance (above 60), or using Stochastic crossovers at the extremes.
Range trades are exited when price closes convincingly beyond one of the range boundaries β a signal that a breakout (or breakdown) is underway and the range has been invalidated. Alternatively, a fixed take-profit near the opposite boundary locks in the gain before risk increases.
Strategy Code
This is a TradingView Pine Script strategy example for this page concept. Paste it into the TradingView Pine Editor, add it to your chart, and run it in the Strategy Tester.
//@version=6
strategy("Range Trading Strategy", overlay=true)
len = input.int(20, "BB Length")
mult = input.float(2.0, "Std Dev")
basis = ta.sma(close, len)This is a thinkorswim ThinkScript strategy example for this page concept. Open thinkorswim, create a custom strategy, paste the script, and apply it to your chart.
input length = 20;
input numDev = 2.0;
def mid = Average(close, length);
def up = mid + numDev * StDev(close, length);
def dn = mid - numDev * StDev(close, length);Join thousands of traders who use auto-Trading to execute this strategy automatically, 24/7.
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