Pros
Straightforward Strategy – Range trading is very straightforward. Ranging markets have stable, predictable price action, and you are required to buy at support and sell at resistance. There are also clear stop loss and take profit placement guidelines.
Quick Turnaround – There is a quick turnaround time for trades in a ranging market. Prices oscillate between support and resistance levels within a short period. This makes the strategy suitable for short-term traders who do not wish to leave their capital exposed to the market for more extended periods.
Applicable to all Markets – All markets tend to have periods where prices range. Whether it is forex, stocks, commodities, indices, or cryptocurrencies, range trading strategies can be applied with a sideways trend in the underlying market.
Cons
Limited Profits – Range trading can limit the profits you can make in any single trend. Take profits are placed rather close to the entry price, which results in low yields. Furthermore, because the price moves back and forth in ranging markets, traders are forced to take many trades to maximize profits. But this results in additional trading charges, limiting the bottom line.
Pinpoint Entries and Exits – Successful range trading requires traders to pinpoint optimal price entry and exit points. Support and resistance areas are usually zones rather than specific price points, and it can be difficult to identify optimal entry and exit prices that offer reasonable risk/reward propositions.
Breakout Risk – This is the most considerable risk when range trading. Price will never be contained within a range forever- it will eventually break out. Breakouts are generally strong and can lead to severe capital losses for range traders, especially if they do not use stop losses.