Markets have a few distinctive states that they fall
into and stay till other state develops. One of the most popular ones is a
range. Traders take advantage of that by trading support and resistance in a
range. One of the best patterns in a range is a narrowing range. It may come in
the form of a triangle or a rectangle. It will always end in a strong move. One
can use it to make nice cash by simply placing buy stop orders above the most
recent high and a sell stop below the most recent low.
The example below of eur/usd pair clearly shows
that. You may see how the pair went into a range mode after a strong move and
in a period of three days stayed in a range. A catalyst for the breakout
upwards occurred this Wednesday when FED came out with interest rate decision.
US dollar collapsed across the board. The rally netted around 200 pips and the
amount may increase if the pair keeps on rising the last day of the week.
Remember, narrowing range is a good opportunity to
take breakout trades and make a lot of pips as a result.
START COPYING POPULAR INVESTORS ON eToroDisclaimer: All trading involves risk. Only risk capital you’re prepared to lose. Past performance is not an indication of future results. This content is for educational purposes only and is not investment advice.
