What Is Range-Bound Trading? Ideas for a Downward Market That Are Range-Bound

By CoinUnited.io Research Team

15 Mar 2023

2 min read

Range-bound techniques are trading tactics used to profit from a sideways market. Users trading in sideways conditions, for instance, will frequently purchase an asset high at the resistance level and subsequently sell it high at the support level. A Sideways Market: How Does It Operate?

Traders must first comprehend the operation of a sideways market (or a ranging market) in order to comprehend range-bound techniques. A sideways market is one in which prices move in a horizontal channel between high and low values, as the name suggests. The theory is that the sideways movement produces reasonably predictable highs and lows for trading assets. To detect range-bound markets, you may utilize technical indicators like the Average True Range (ATR) and High Low Bands (HLB). Of course, it is hard to accurately forecast market behavior. In a sideways market, traders run the risk of missing an upcoming breakout or, even worse, losing a lot of money on a bearish slump.

Range-bound trading has its roots in traditional markets like the stock exchange and forex, but it is now widely used by crypto traders. By locating the key support (low price) and resistance (high price) levels, cryptocurrency traders profit from sideways markets. The best time to purchase an asset is when it is trading near its support level trend line, whereas the best time to sell an asset is when it is trading near its resistance level trend line. The range, also known as the price channel, is the area where prices move side to side. Here's an illustration to help you understand: Let's imagine that over the previous few days, the price of an asset has fluctuated regularly between $50 and $53. Using a range-bound approach, traders would purchase the asset at $50 (support) and sell it at $53 (resistance) (resistance). Before resuming its previous trend, the market will occasionally halt and drift sideways. Yet, before the opposition causes a reversal, the market can be indecisive.

The simplest method for traders is to place buy orders near support and sell orders near resistance after identifying the range.

Mistiming a breakout or, worse still, a downward breakdown is a danger that comes with range-bound techniques. By placing stop-loss orders near the asset's support and resistance levels, traders frequently reduce this risk. Traders frequently change their approach or wait for range-bound circumstances to reappear if the asset price breaks the channel.

Some crypto users leverage tools made to imitate range-bound trading tactics to save time on tiresome tasks like examining charts and manually placing orders. These products allow users to leverage a sideways market without placing a trade order. They often offer a user-friendly interface that: Captures both potential losses and gains. Enables users to join and leave the market with greater flexibility. For example, the Range Bound product from CoinUnited.io makes the complicated tactics necessary for trading in a sideways market more simpler to implement.

The user will earn incentives based on the prospective annual percentage rate (APR) shown on the settlement date if the asset remains within the specified price range throughout the subscription period.

The user will get less than their initial deposit amount if the asset moves within or over the predetermined price range throughout the subscription period. Trading range-bound assets has the most obvious danger of ending up on the wrong side of the market. There is no such thing as a flawless price prediction algorithm, trading technique, or individual. There is no telling when an asset may approach or break the trend lines, even if the market is ranging and producing seemingly comparable patterns. Unless the purchase or sell price levels are met, assets are either inertia or locked in. The chance of loss is increased for traders who don't use stop-loss orders. If the reference price of the underlying asset exceeds the predefined price range, users may receive less than the amount they initially placed for certain range-bound products.

For experienced traders who are aware of their risk tolerance and have a firm grasp of technical analysis, range-bound trading can be a successful technique. It takes time, dedication, and vigilance to develop a reliable range-bound trading technique in the crypto market. Use the examples in this article as a jumping-off point for your own research into trading in a sideways market. Before investing in any financial opportunity, traders should always conduct their research.

It is not meant to serve as financial advice or to endorse the purchase of any particular item or service.

Latest Crypto Trading Articles & Market Insights

See All Articles