Clear DefinitionsVolatility Range Trading
1 min read
Pronunciation
[vol-uh-til-i-tee raynj trah-ding]
Analogy
Like repeatedly buying surfboards at low tide and selling them at high tide, profiting from the water’s natural ebb and flow.
Definition
A strategy that exploits predictable price oscillations within defined upper and lower bounds, buying near support and selling near resistance levels.
Key Points Intro
Range trading captures gains from cyclical market movements.
Key Points
Support & resistance: identifies price boundaries
Indicators: uses RSI, Bollinger Bands, or pivot points
Position sizing: controls exposure per trade
Risk management: sets stop-loss outside range
Example
A trader uses Bollinger Bands on BTC/USD to buy when price touches the lower band and sell at the upper band during sideways markets.
Technical Deep Dive
Algorithms scan historical volatility and mean reversion tendency. Entry signals trigger limit orders at calculated support; exits use resistance or trailing stops. Backtests measure win rate and expectancy across various timeframes.
Security Warning
Breakouts beyond the range can trigger rapid losses; always use protective stops.
Caveat
Range conditions can end abruptly in trending markets, invalidating the strategy.
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