Range is a term used to describe when price is trading between defined highs and lows, moving within these two boundaries without breaking through them.
A “range” is the difference between the highest and lowest price in the market during a specific period.
It is mainly used as a volatility indicator.
If the market is more volatile, it means that the market was more volatile during the analysis period.
How to use scope
As with any volatility indicator, range can be used as a measure of the potential risk of a trade.
If a market trades in a wide range, the risks associated with trading it tend to be higher.
It can also be used to identify support and resistance levels
If the market is trading within a range for an extended period of time, then the upper and lower limits of that range can be considered strong areas of support and resistance.
How to calculate range
To calculate the range, you simply take the highest price point reached during your analysis period and subtract the lowest price point.
For example, GPB/USD hit a high of 1.2090 and a low of 1.2010 on a certain trading day. The range for the day is 1.2090 – 1.2010 = 90 pips.
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