What does ‘range‘ in forex mean?
The term ‘range’ refers to the horizontal price channel within which a currency pair fluctuates over a period of time. It represents the upper and lower bounds of the price movement and is often used by traders to identify potential entry and exit points for trades.
Traders analyze the range to determine the support and resistance levels, which can help them make trading decisions. A narrow range indicates a consolidation phase, while a wide range may signal increased volatility. Understanding the range is crucial for traders to effectively manage risk and capitalize on price movements in the forex market.
Example of a ‘range’
Let’s consider the EUR/USD currency pair. If the pair fluctuates between 1.1200 and 1.1300 over the course of a trading day, the range for that day would be 100 pips (1.1300 – 1.1200 = 100 pips).
Understanding the range can help traders make informed decisions about entry and exit points for their trades.