# Range trading: a strategy to learn and test | DT Academy > When price moves sideways, buy near support and sell near resistance. [Strategy Library](https://www.thedtterminal.com/academy/strategies) Range # Range trading When a market stops trending and moves sideways between support and resistance, you buy near the bottom and sell near the top. The hard part is not the entry: it is spotting when the range has ended. Intermediate Forex crosses, indices, any market that is not trending Quieter hours such as the Asian session M15, H1, H4 [Use this strategy](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_use&redirect=%2Fjournal%2Facademy%2Fstrategies%2Frange_trading) [Practice it](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_practice&redirect=%2Fjournal%2Facademy%2Fstrategies%2Frange_trading) Example 01 ### Range trading on a chart EURGBP · H1 Range touch, fade Range: 0.8519 to 0.8581Entry: 0.8523Stop: 0.8501Reward to risk: 1 : 2.4Sample candles, not market data Both edges had held more than once, and the range left room for about 2R. A close below support would have ended the range, and the idea with it. ### The rules Setup A range: price has turned up from support at least twice and down from resistance at least twice No trend: flat averages that price keeps crossing The range is wide enough for at least 2R after spread and costs Entry Buy near support or sell near resistance, by hand or with a limit order Stop Just beyond the edge of the range, with room for price to overshoot it Target The other side of the range, or just short of it Manage Close the trade if a candle closes beyond the range: assume a new trend has started ### Common mistakes - Calling a range too early. You cannot know a range has started until it has touched both sides more than once. - Stops inside the overshoot. Price often pokes past the edge; a tight stop there gets taken out. - Ranges too narrow to pay. After spread and costs a small range leaves nothing to win. - Fading a real breakout. A big jump in volume on the break suggests it may carry on. ### When it's off - Stop range trading it once a candle closes beyond the range, especially on rising volume - Skip ranges too narrow for 2R ### Words to know Trading range A sideways market with a clear high and low that price has touched at least twice each, making neither higher highs nor lower lows. A range on one timeframe can be a trend leg on a lower one. Consolidation A short pause where candles get smaller and overlap in a tight area, often before a bigger move. It does not tell you which way that move will go. Support and resistance Zones, not single prices, where buyers (support) or sellers (resistance) have shown up before. A level is broken when a candle closes beyond it, and a broken level is often watched from the other side. False breakout Price breaks beyond a level but cannot stay there and comes back inside, trapping breakout traders. It is only known after the return, never at the breakout candle's close. RSI overbought and oversold Wilder's RSI (14 periods by default) reads above 70 as overbought and below 30 as oversold. It measures the speed of recent gains against losses, and in a strong trend it can stay overbought for a long time. Overshoot Price briefly poking past the edge of a range. Whipsaw Getting stopped out by noise, then seeing price go your way. When you make it yours, I'll ask what the rules above leave open. Start with one of these: - How many touches on each side confirm a range for you? - Is the range wide enough for at least 2R after spread and costs? - Where exactly is your stop, and how much room do you give past the edge? [Ask Edge in DT Terminal](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_question&redirect=%2Fjournal%2Facademy%2Fstrategies%2Frange_trading) ## From DT Academy - [Market structure](https://www.thedtterminal.com/academy/market-structure) - [Market sessions](https://www.thedtterminal.com/academy/market-sessions) ## What testing exists Research on currency markets supports the idea that trends often stall at support and resistance. No test of a specific range rule was found. ## Before you trust a backtest - Many professional traders risk under 1% of their account on one trade idea, and the common guideline is 1 to 2%. - The more versions of a rule you try on the same data, the more likely a good backtest is luck. Decide your rules before you test. - Include spread and commission, and practice on dates you have not looked at, before you trust a result. ## Sources - [Range trading explained (opens in a new tab)](https://www.ig.com/en/trading-strategies/range-trading-explained-190513), IG - [What is range trading? (opens in a new tab)](https://www.fidelity.com/learning-center/trading-investing/trading/range-trading), Fidelity - [Trading the Tokyo session (opens in a new tab)](https://www.ig.com/au/ig-academy/a-look-at-forex-trading-strategies/trading-the-tokyo-session), IG Academy - [Forex day trading strategies (opens in a new tab)](https://www.cmcmarkets.com/en-gb/forex/forex-day-trading-strategies), CMC Markets - [John Murphy's Law #3: support and resistance (opens in a new tab)](https://articles.stockcharts.com/article/stockcharts-insider-john-murphys-law-3-find-the-low-and-high-of-it-support-resistance/), StockCharts - [John Murphy's Law #6: follow that average (opens in a new tab)](https://articles.stockcharts.com/article/stockcharts-insider-john-murphys-law-6-follow-that-average-moving-averages/), StockCharts - [Support for resistance (Economic Policy Review, 2000) (opens in a new tab)](https://www.newyorkfed.org/medialibrary/media/research/epr/00v06n2/0007osle.html), Federal Reserve Bank of New York - [Controlling risk (opens in a new tab)](https://www.ig.com/en/ig-academy/money-management/controlling-risk), IG Academy - [Forex risk management (opens in a new tab)](https://www.cmcmarkets.com/en-gb/forex/forex-risk-management), CMC Markets - [Pseudo-mathematics and financial charlatanism (Notices of the AMS, 2014) (opens in a new tab)](https://scholarworks.wmich.edu/math_pubs/40/), Bailey, Borwein, López de Prado and Zhu - [What is backtesting? (opens in a new tab)](https://www.ig.com/uk/trading-strategies/what-is-backtesting-and-how-do-you-backtest-a-trading-strategy--220426), IG DT Academy is education, not financial advice. Nothing here is a recommendation to buy or sell any instrument. Trading carries a high risk of losing money, and past results, examples and backtests do not guarantee future results. [Risk disclosure](https://www.thedtterminal.com/risk-disclosure) --- Risk disclosure: Futures, forex and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing one's financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. [Read the full risk disclosure](https://www.thedtterminal.com/legal/risk-disclosure). 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