Trade Management Tactics for Forex Range trading

What Range Trading?

When you find a currency pair which has been moving within a defined support and resistance level, for a long time, it is called ‘Range trading’.

Tactics of Managing Trade

Once you have identified the setup, then trade plan to purchase at support & sell at resistance, until the range stays intact.

Here I take one hour chart of currency pair NZDCAD for looking range. In this scenario, when you see the price is trading at support, then you should take the long time positions with a stop below the low wick in the ranges. You would set a limit (profit) at the range’ top and let your trade play out.

Now, if your trade goes as per your plan and price of the trade goes to the limit level, you would get a 40 pips’ profit. against it, if the trade price retraces & takes the step, you would suffer a loss of 8 to 10 pips.

Let’s examine a few changes on the same trade.

Here you will take the same above mentioned set up for trade, but you will increase the probability of taking gain by moving your limit down, a little bit close to your entry. You will notice that price hit the range ‘top four times, whereas, the price touched your fresh take profit level 15 times total.

In this situation you give up some part of profit, in case the currency pair trades to the range’s top.However you can increase your chances of hitting limit and achieving the solid profit.You may have a chance to gain more pips but, along with a low likelihood of success or have a chance to gain a few pips less but along with a great probability of success.
Let’s take two positions with same setup.
In this case, I recommend you to trade multiple lot, because it allows you more flexibility in your trade management. But keep in mind, that any time you increase your position size; you also increase your risk. For instance, if you set up your trade stop at 10 pips, then, with one lot you are having risk for 10 pips, with two lots, 20 pips & so on. But be sure, your account size is able to handle the risk. You can apply the same strategy with 2, 6 or ten lots.

If the trade gets a pre-determined profitability’ level this flexibility allows you close one of your positions, if you close one position, you lock in the profit. Moreover, the stop could be moved to manage the trade at an entry level price.

If, the 2nd position retraces and manages to hit your stop you are closed of that second position with no profit, but the loss is also not incur, because you have 20 pips from your first position lock.

If price continues to move toward the range ‘ top the second position will be closed after gaining the full pips into range. In this example it will be 40 pips. The net gain would be 20+ 40 =60 pips.