Ranging market

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    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:

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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

    (1) Price finds resistance in a range

    (2) Price finds support in a range
    (3) Price finally breaks out of the range through support

    Read more about trading in ranging and trending markets:

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