A range occurs when a security trades in a consistently high and low-price range for a given period. In this situation, a bounded range is identified by charting the high and low-price points across horizontal trendlines.
Security prices that are in the top area of a bounded range are called resistance levels, at this level, with a growing number of sellers in the market the asset will have resistance to trading.
Conversely, at the lower end of the price range a security is expected to experience price support as more buyers will be willing to trade at that price.
Range trading strategy
A range trading strategy focuses on buying securities at a price support trendline and selling at a resistance trendline. However, there is a risk with this strategy that a breakout or breakdown will occur, which happens when a price doesn’t change and remains contained within a support or resistance trendline.
Stop-loss points can be placed at price trendlines within a bounded range to prevent major losses caused by a breakout or breakdown.