Range
Candlefocus EditorRange-bound trading is a strategy where an investor or trader buys and sells a security within a defined range. Investors and traders do this because they believe the security will remain in a given trading range over a period of time. This means that as long as the price remains within that range, they will not seek to buy or sell the security. It is a strategy of patience and waiting for other opportunities in hopes of larger profits.
The amount of change in a range compared to the overall price of the security gives an indication of the level of volatility that security is experiencing. For example, a stock that is trading in a narrow range of 10 dollars may indicate that the security has low volatility, while one that is trading in a range of 50 dollars may indicate that the security has medium volatility.
For investors, range is a useful tool for getting a better understanding of the market. By looking at the range, they can get a general idea of how volatile the market is, and they can take that information into consideration when making their next move. Range-bound trading is a strategy that investors and traders may pursue as a long-term strategy or as a short-term trade.
Range is a valuable concept for traders and investors alike. By understanding the range of a security, they have the potential to use it to their advantage and maximize their profits. By understanding the level of volatility associated with the security, they can make more informed decisions with their investments. Range-bound trading is an interesting strategy for those willing to be patient and wait for the right opportunities.