‘When life gives you lemons, make lemonade’
A lot of traders look for breakouts and sharp moves to boost their P&L, and in a lot of cases make a great success of this. However, trading defined ranges can potentially offer more than one opportunity when looking at different assets, and when you have strong levels of support and resistance, your chances of trading profitably can actually increase as you may have the opportunity to both buy and sell your asset as it touches both support and resistance. When range trading you are also aware of when not to trade, especially if price action is gathered around the center of the range. Sometimes when there is unexpected news on an asset class, traders may jump on the trade, but if this asset is in the middle of a trading range it may be prudent to see if either support or resistance is tested before making a trading decision.
EUR/CAD Daily Price Chart
Chart via ProReal Time
One pair that looks as if it has set a solid trading range over the last two-and-a-half months is EUR/CAD. Both support and resistance have been tested and held on multiple occasions since the range formed with reactions from these levels also being reasonably quick. Both support and resistance levels can be used by traders to help set invalidation levels with the four-point trading range allowing a slightly more flexible approach when setting stop losses. Both the Canadian dollar and the Euro are likely to be volatile over the coming months as both sides look to re-set monetary policy to fight off inflation and this may provide further opportunities to test the current range.