What is a Range Bound Market

What is a Range Bound Market

The Range Bound Market means that the price moves up and down between the highest and lowest prices (Ranging). The next highest price will be the resistance level that must be penetrated by the price itself. And the lowest price will be a support level that must be broken by the price too.
If the price continues to move up and down between the support and resistance levels then it can be said that the price does not experience trending but is experiencing ranging (consolidated) or sideways.

Average Directional Index (ADX)

To determine whether prices are ranging or not we can use the ADX indicator. The way is very easy, we only need to see how many ADX values ​​(range of values ​​0 – 100) price movements of the currency pairs that we are analyzing.
If the ADX value is <25 then it is said that prices are ranging.
ADX indicator

Bollinger Band

Again we discuss the Bollinger Band which is a tool that indicates that the market is crowded or its volatility is high by widening the ribbon and narrowing the ribbon when the market is quiet or less volatile.

bollinger band indicator MT4
bollinger band indicator MT4

So when bollinger bands narrow, this indicates that market volatility is low and price movements are getting smaller and vice versa when the bollinger band widens, this shows market volatility is high and price movements are getting higher.

The basic idea of ​​range bound strategy is that the currency pair has a low and high price then we trade it with the profit between the two prices.

With us buying at the lowest price we hope to sell it at the highest price to get profit. And so does selling at the highest price we hope to buy at the lowest price. And one of the tools that we can use to determine the trading range is the channel and bollinger band indicators above.

You can use the help of other indicators such as RSI , Stochastic , or Oscillator to confirm your decision when trading using this bound market range method.

For examples of their usage, please see the picture of the price movements of the GBP / USD currency pair below.

Well, after learning about the trending market and range bound market, the thing that must be learned is to be smart to be able to read the market conditions so that we will still be able to make any profit, of course the condition is by using the right strategy.

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