Range trading is based on support and resistance. Support and resistance levels can be identified on a price action chart before a market reversal in the opposite direction. Trading ranges are formed when these support and resistance levels are combined. The price will continue to break prior support and resistance levels as long as the market continues to move, establishing a stair-like pattern of support and resistance. In an equidistant market, the price trades sideways between established support and resistance levels. Traders begin selling as soon as the price reaches the overbought (resistance) level. Additionally, it's a buy signal when the price reaches the oversold (support) level. Last but not least, if the price breaks out of this defined range, it may signal the start of a new trend. Range traders are more likely to be interested in markets that move back and forth between support and resistance levels rather than breakouts, which are more common in trending markets.

Range trading is a strategy in financial markets where traders identify and capitalize on price movements within a defined range. This range is marked by resistance (upper limit) and support (lower limit) levels. Traders buy when the price nears the support level and sell when it approaches the resistance level, anticipating the price will remain within these boundaries. Key to this strategy is identifying markets that exhibit sideways price action, rather than trending up or down. Range traders rely on technical analysis tools, such as oscillators (e.g., RSI, Stochastic) and moving averages, to confirm entry and exit points. While it can be profitable in stable markets, range trading risks include sudden breakouts or breakdowns, leading to potential losses.