The high price acts as a major resistance level in which price can\u2019t seem to break through.<\/p>\n\n\n\n
Likewise, the low price acts as a major support level in which price can\u2019t seem to break as well.<\/p>\n\n\n\n
The market movement could be classified as horizontal, ranging, or sideways<\/strong>.<\/p>\n\n\n\n It\u2019s also known as a \u201cchoppy market<\/strong>\u201d or simply as \u201cbeing choppy<\/strong>\u201c.<\/p>\n\n\n\n A choppy market<\/strong> is the opposite of a trending market. Kind of like choppy waves in the ocean.<\/p>\n\n\n\n In a choppy market, there is no clear direction<\/strong>, and the price just \u201cchops around<\/strong>\u201d or \u201cchops up and down<\/strong>\u201d and trades within a very narrow range.<\/p>\n\n\n\n Trend traders tend to get \u201cchopped up\u201d in choppy markets.<\/p>\n\n\n\n What is the favorite food of a range-bound trader?<\/p>\n\n\n\n Chop suey. ?<\/p>\n\n\n\n Okay, let\u2019s get back on topic. Chop chop!<\/p>\n\n\n\n One way to determine if the market is ranging is to use the same ADX\u00a0as discussed in the\u00a0ADX lesson.<\/p>\n\n\n\n A market is said to be ranging when the ADX is below 25<\/strong>.<\/p>\n\n\n\n Remember, as the value of the\u00a0ADX\u00a0diminishes, the weaker trend is.<\/p>\n\n\n\n In essence,\u00a0Bollinger Bands\u00a0contract when there is less volatility in the market and expands when there is more volatility.<\/p>\n\n\n\n Because of that, Bollinger Bands provide a good tool for breakout strategies.<\/p>\n\n\n\n When the bands are thin and contracted<\/strong>, volatility is low and there should be little movement of price in one direction.<\/p>\n\n\n\n However, when bands start to expand<\/strong>, volatility is increasing and more movement of price in one direction is likely.<\/p>\n\n\n\n Generally, range trading environments will contain somewhat narrow bands compared to wide bands and form horizontally.<\/p>\n\n\n\n In this case, we can see that the Bollinger Bands are contracted, as the price is just moving within a tight range.<\/p>\n\n\n\n The basic idea of a range-bound strategy is that a currency pair has a high and low price that it normally trades between.<\/strong><\/p>\n\n\n\n By buying near the low price, the forex trader is hoping to take profit around the high price.<\/p>\n\n\n\n By selling near the high price, the trader is hoping to take profit around the low price.<\/p>\n\n\n\n Popular tools to use are\u00a0channels\u00a0such as the one shown above and Bollinger Bands.<\/p>\n\n\n\n Using\u00a0oscillators, like\u00a0Stochastic\u00a0or\u00a0RSI, will help increase the odds of you finding a turning point in a range as they can identify potentially oversold and overbought conditions.<\/p>\n\n\n\n![\"Range-Bound](\"https:\/\/bpcdn.co\/images\/2016\/05\/grade12-market-ranging.png\" "\\"Range-Bound")
<\/a><\/figure>\n\n\n\nADX in a Ranging Market<\/h2>\n\n\n\n
<\/a><\/figure>\n\n\n\nBollinger Bands in a Ranging Market<\/h2>\n\n\n\n
<\/a><\/figure>\n\n\n\n