Range is a term used to describe when a price is trading between a defined high and low, moving within these two boundaries without breaking out from them.
The “range” is the difference between a market’s highest and lowest price in a given period.
It is mostly used as an indicator of volatility.
If a market has a wide range, it’s a sign that it was volatile over the period analyzed.
How to Use Range
As with any indicator of volatility, range can be used as a means of measuring a trade’s potential risk.
If a market is trading with a wide range, then the risk associated with trading it will tend to be higher.
It can also be used to identify support and resistance levels
If a market has been trading within a certain range for a long period, then the upper and lower limits of that range can be taken as strong areas of support and resistance.
How to Calculate Range
To calculate a range, you just take the highest price point that is reached in the period you are analyzing and subtract the lowest price point.
For example, GPB/USD hit a high of 1.2090 and a low of 1.2010 on a given trading day. Its range for that day would be 1.2090 – 1.2010 = 90 pips.
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