Learn Range Bound Trading
Range-Bound Trading: Types of Strategies for a Sideways Market
Are you looking for a trading strategy that works well in a sideways market? Range-bound trading may be the answer. In this article, we'll explain what a sideways market is, how range-bound trading works, and the different types of range-bound strategies you can use.
What Is a Sideways Market?
A sideways market, also known as a ranging market, is a trading environment in which the price action moves in a horizontal channel between high and low prices. It's characterized by relatively predictable highs and lows for trading assets. Technical indicators like Average True Range (ATR) and High Low Bands (HLB) can help you identify range-bound markets.
What Is Range-Bound Trading?
Range-bound trading is a method by which traders capitalize on a market that's moving sideways. Crypto traders, for instance, take advantage of sideways markets by identifying major support and resistance levels. They buy assets at the support level and sell assets at the resistance level, making profits from the price oscillations between the two levels.
What Are the Different Types of Range-Bound Trading Strategies?
- Spot: This is the most straightforward strategy, where traders place a buy order near support and a sell order near resistance.
- Breakouts and breakdowns: This strategy involves setting stop-loss orders near the asset's support and resistance levels to mitigate the risk of mistiming a breakout or a downward breakdown.
- Automated trading strategies: Some crypto users leverage products designed to mimic range-bound trading strategies. These products provide an accessible interface that allows users to leverage a sideways market without placing a trading order.
Range-Bound Trading Example and Automated Trading Strategies
Binance's product Range Bound is an excellent example of an automated trading strategy. When users subscribe to Range Bound, they can receive rewards if the asset stays within the set price range during the subscription period. If the asset touches or exceeds the set price range, they will receive less than their initial deposit amount.
Closing Thoughts
Range-bound trading can be a viable strategy for experienced traders who are aware of their risk tolerance and have a solid understanding of technical analysis. However, no trading strategy can predict price action with 100% accuracy, so traders must do their due diligence before investing in any financial opportunity. Remember to set stop-loss orders to mitigate the risk of loss.
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