Ranging market

What are ranging markets?

The market is said to be ranging when the price of a financial instrument is making the same highs and lows a number of times. The most common definition of a ranging market is when the price hits the same support and resistance levels three times.

Learn more about support and resistance:

Lesson
Identify and use support and resistance levels to find out where buyers and sellers are entering the markets. Find trading opportunities.
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A ranging market with low volatility can also be called a flat market.The opposite of a ranging market is a trending market, where the market is either in an uptrend or downtrend.

The following chart shows an example of a ranging market, including the green resistance and red support lines:

Ranging market

Trading in a ranging market

Traders may look to buy or sell an asset when the price breaks through either the support or resistance level.

For example, in the chart below, the price encounters the same support and resistance levels several times before breaking out of the range. A breakout eventually occurs after the sellers overpower the buyers and break through the established support level, at which point traders may look to sell.

Support breakout

number_1 Price finds resistance in a range
number_2 Price finds support in a range
number_3 Price finally breaks out of the range through support

Read more about trading in ranging and trending markets:

Lesson
How does a trader determine the direction of the market? Learn how to identify the market conditions to help you determine price movement.
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