Range Trading Strategy: Buy Low, Sell High

Overview

Range trading exploits sideways markets by repeatedly buying at support and selling at resistance. While trend traders sit out consolidations, range traders harvest them. The strategy has a high win rate but small average reward — discipline on stops is everything.

Setup

• Instruments: range-bound forex pairs (EUR/CHF, AUD/NZD), consolidating stocks
• Timeframe: 4-hour or daily
• Indicators: horizontal S/R lines, RSI(14), Stochastic(5,3,3)
• Regime: ADX(14) < 20 and clear horizontal boundaries with 3+ touches

Entry rules

1. Confirm price is oscillating between clear support and resistance (at least 3 touches each)
2. Buy longs when price touches support and RSI is below 30 or Stochastic crosses up from oversold
3. Sell shorts when price touches resistance and RSI is above 70 or Stochastic crosses down from overbought
4. Wait for a rejection candle (pin bar, engulfing) before entering

Stop loss rules

• Stop: just beyond the range boundary plus 1 × ATR(14) buffer
• Exit immediately if a daily candle closes outside the range — the range has broken

Take profit rules

• Target: the opposite side of the range
• Scale out: 50% at midpoint, 50% at the boundary
• RR target: 1.5:1 to 2:1

Risk management

Parameter	Value
Risk per trade	1% of account
Max trades per range	3 round trips
Position size	Risk ÷ (entry − stop)
Range width filter	Only trade ranges > 1.5 × ATR

Confirm sizing with the position size calculator and validate the stop with the stop-loss calculator.

Common mistakes

• Treating a tightening range as a tradeable range — breakouts usually follow compressions
• Holding a loser when the range breaks against you
• Trading ranges during news periods when volatility spikes unpredictably

Key principle

The range is only alive until it breaks. Take profits at the opposite boundary, and never assume the range will hold forever. When price closes outside, switch from range logic to breakout logic.