What are these Support and Resistance zones in a Range Market ?
We will see how we can use range market support and resistance zones as a simple forex trading idea and place forex trades. We will learn about the process in identifying range markets, support and resistance in range market and placing of trades in this article.
Support and Resistance Zones in a Range Market
( Range Market - Price stays within a box / rectangle area )
What exactly is a range market ? When price stays around a rectangle or box shape area, it is generally referred to as a range market. Normally these types of situations arise just after huge move in price as both bears and bulls are trying to move the market in both directions ( So after a range market, you will most often see a uptrend or downtrend ).
If you look at the image above, you will notice that the price was not able to go above a certain level and falls back right ? ( look at the top lines ) These areas are called strong resistance zones/areas in a range market.
So How can i mark these zones or draw resistance lines ? Just looks for 2 or 3 strong resistance points ( top points ) and then draw a line or two ( generally the resistance zones will be more effective in 1 hr or higher time frameworks. Higher the time framework, more effective the resistance zones ! ). When you become familiar with the charts & range markets, you will be able to identify these zones easily and trade without even drawing lines !
Now look at the forex chart image again, you will notice that the price was not able to go below a certain price level right ? ( look at the bottom lines ). These are strong support zones in a range market.
So How can i mark these zones or draw support lines ? Look for 2 or 3 strong support points ( lower points ) and draw a line or two ( same like resistance zone, these too are more effective in 1 hr or higher time frameworks.)
How to enter a trade in range market ?
You can enter a 'SELL' trade when price reaches resistance zones and falls back.
You can enter a 'BUY' trade when price reaches support zones and falls back.
In order to make sure the trade will become more successful just zoom in and look for overall trend in the chart ( if it looks like an uptrend, better to go for 'BUY' trades. If it looks like a downtrend better to go for 'SELL' trades. Incase if it looks more like a range market ,then you may enter both types of trades )
How to identify the end of range or break of range market ?
Well unlike in trending markets, it will be bit difficult to identify the end of a range market but high impact news ( you can use investing.com or similar sites to get trading news ) can result in ending the range markets. Also if you notice the price slowly heading towards one direction, it may be an indication that the range is about to be over soon.
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