Range

In trading, the range refers to the difference between the highest and lowest price levels of an asset over a specific period of time. It is essentially the price movement within a certain time frame, and it can help traders understand the potential for price fluctuations and the overall market sentiment.

Range can be useful for traders looking to analyze market volatility or predict future price movements.

The range however is not just a measure of volatility, but also a valuable tool for assessing risk and identifying key levels in the market.

When the market is trading with a wide range (meaning there is a significant difference between the high and low prices during a specific period), the asset is more volatile. This increased volatility means larger price swings, which can lead to higher potential profits but also higher risk.

Conversely, when the market is trading within a narrow range, price movement is less volatile, and the risk associated with trading tends to be lower. The price is not likely to move dramatically in either direction, so the trades might experience less slippage or rapid market changes.

To calculate the range of an asset or market for a specific period, the process is quite simple:

Range = Highest Price − Lowest Price. For example, the EUR/USD currency pair.

• The highest price during the period is 1.1205;
• The lowest price during the period is 1.1185.

1.1205 − 1.1185 = 0.0020. Since 1 pip in most currency pairs like EUR/USD is the fourth decimal place (0.0001), we need to just move the decimal point four places to the right to get the range in pips:

0.0020 = 20 pips. This means that the price of EUR/USD moved 20 pips during that period, showing the amount of volatility in the market.