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Range definition
A range is the gap between the highest and lowest price an instrument reaches over a set period. That period can be a single candle, a session, a day, a week, or a longer stretch of trading.
A range-bound market moves sideways between a support level below and a resistance level above, without a clear uptrend or downtrend. Support is where buying interest tends to appear and halt a fall; resistance is where selling pressure tends to appear and cap a rise. Range traders buy near support and sell near resistance while the boundaries hold.
A range measures sideways movement, so it contrasts with a trend, where price makes successively higher highs or lower lows in one direction. When price breaks above resistance or below support, the range ends and a breakout begins. The width of the range also reads as volatility: a wide range signals large price swings, a narrow range signals quiet conditions.
Range Example
A stock trades between USD 48 and USD 52 over one week.
The weekly range is:
USD 52 - USD 48 = USD 4
While the stock keeps bouncing between USD 48 support and USD 52 resistance, it is trading in a range. A close above USD 52 or below USD 48 would signal a breakout.
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