Why are small ranges risky to trade? | Forex Factory

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Why are small ranges risky to trade?

  • #1
  • First Post: Jul 22, 2008 7:47am Jul 22, 2008 7:47am
I have seen several posts mentioning that the pair was caught in a "small range" and should not be traded.

I have noticed that during hours when the markets are closed pairs will establish a small range of 10-20 pips and bounce up and down in them over several hours.

I have also noticed that over an extended period of time the price will bounce off pivot/support/res. levels in a 40-50 pip range.

Why should you avoid trading these ranges? I would think that once the range is established you could take advantage of it. Is the risk that you might get caught on the wrong side of a dip or spike?
  • #2
  • Jul 22, 2008 8:25am Jul 22, 2008 8:25am
Quoting Thunderj
I have seen several posts mentioning that the pair was caught in a "small range" and should not be traded.

I have noticed that during hours when the markets are closed pairs will establish a small range of 10-20 pips and bounce up and down in them over several hours.

I have also noticed that over an extended period of time the price will bounce off pivot/support/res. levels in a 40-50 pip range.

Why should you avoid trading these ranges? I would think that once the range is established you could take advantage of it. Is the risk that you might get caught on the wrong side of a dip or spike?
I think it's the spread, not so much the actual pip gain. The s/r argument makes a little more sense.
  • #3
  • Jul 22, 2008 8:35am Jul 22, 2008 8:35am
Well i really hope u also notice that eventho the price bounce of the s/r several times, still no guarantee that this pattern will keep happen each time the price touch the s/r.coz it will really bad if you stuck on the bad momentum, and also as you said "spike" sometimes do exist ...most of all, maybe 10-20 pips range is not an adequate room to mature a plan/setup maybe.IMHO

Quoting Thunderj
I have seen several posts mentioning that the pair was caught in a "small range" and should not be traded.

I have noticed that during hours when the markets are closed pairs will establish a small range of 10-20 pips and bounce up and down in them over several hours.

I have also noticed that over an extended period of time the price will bounce off pivot/support/res. levels in a 40-50 pip range.

Why should you avoid trading these ranges? I would think that once the range is established you could take advantage of it. Is the risk that you might get caught on the wrong side of a dip or spike?
  • #4
  • Sep 7, 2014 6:47am Sep 7, 2014 6:47am
the thing with ranges is that it might be ranging on the daily chart but on the weekly chart its having a trend and the ranging is just a pause before the trend continues.that's hwy you should always look at higher time frames befre you place a trade
  • #5
  • Sep 7, 2014 9:21am Sep 7, 2014 9:21am
Depends on if you are going to micromanage it yourself or not.
  • #6
  • Sep 7, 2014 9:36am Sep 7, 2014 9:36am
Quoting Thunderj
I have seen several posts mentioning that the pair was caught in a "small range" and should not be traded.
Because your money management rules concerning the rules what R:R you at a minimum require before you take a trade, would disqualify trades in pairs that are in a small range.
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  • #7
  • Nov 26, 2020 2:52am Nov 26, 2020 2:52am
Risk is a common issue in the forex market. Most traders lose their money because they can not take risks. You need to make a good plan to minimize the risks.
  • #8
  • Nov 26, 2020 11:29am Nov 26, 2020 11:29am
We all know forex is a risky market. But that risk can easily handle with proper risk management strategy.
  • #9
  • Nov 27, 2020 2:58am Nov 27, 2020 2:58am
Forex is a risky market. If you want to minimize your risks, you need to make a profitable trading plan.
  • #10
  • Nov 28, 2020 6:18am Nov 28, 2020 6:18am
In small range, the space for movement is very little. And price can break either side of the range. It could break upside or downside. That's why trading in small range is risky. Better to wait for breakout.
  • #11
  • Last Post: Nov 28, 2020 8:46am Nov 28, 2020 8:46am
In a small range the direction changes very often and with little signal that it will do so. They are unpredictable and that makes them risky to trade.
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