How to make steady profits in a trendless market – range trading strategy

How to make steady profits in a trendless market—range trading strategy

In the trading market, when prices fluctuate frequently between a clear support line and a resistance line, but lack a clear directional trend, range trading methods have become the preferred strategy for some traders. Range trading, as the name suggests, is a trading method conducted within a predefined price range. Its core lies in accurately capturing the turning points of the price at these key levels, thereby creating good opportunities for traders to enter and exit. So how to use interval trading?

Determine the trading range first

First, clarifying the trading range is the prerequisite for implementing interval trading. This is usually achieved by observing the behavior of the price touching the support line and the resistance line multiple times. Traders need to estimate the height of the range based on this and evaluate whether the range has sufficient profit potential.

Identify support and resistance lines

After using the horizontal line to clearly mark the support and resistance positions, technical indicators such as stochastic indicators (KDJ) or relative strength indicators (RSI) can be used to verify and predict the inflection point of the price. These indicators can help traders determine whether the market is close to overbought or oversold, thereby predicting possible reversal points.

Use RSI indicators

RSI indicators usually fluctuate between 20 and 80. An RSI above 80 is usually overbought, while an RSI below 20 is oversold. However, these thresholds need to be flexibly adjusted according to the circumstances.

• Overbought situation: When the RSI exceeds 80, the market may overheat, and investors may consider selling.

• Oversold situation: When the RSI is below 20, the market may be too cold, and investors may consider buying.

• Consolidation status: When the RSI value is close to 50, the market may be in a consolidation status, and investors should stay on the verge of waiting and watching.

Diverism phenomenon

When the market price hits a new high (or new low) and indicators such as RSI do not hit a new high (or new low) simultaneously, or even move in reverse, it indicates that the market momentum diverges from the price trend. This may be a signal that the market is about to reverse, and traders can operate in reverse accordingly.

Application of KDJ Indicators

In the KDJ index system, the K value, D value and J value each have their own importance. In extreme market conditions, the stability of the D value is often better than the K value, while the extreme reading of the J value (below 0 or above 100) is often regarded as a strong trading signal. Traders should consider these indicators in a comprehensive way to develop more accurate trading strategies.

The range trading strategy is particularly applicable when there is a lack of clear trend in the foreign exchange market and prices only fluctuate within the established range. Traders can evaluate potential profits based on range heights and flexibly adjust their position management strategies. If the range height is sufficient and the market continues to fluctuate, range trading may become an effective means to achieve stable returns.